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One of the trending searches before last week’s Greek election was “how to trade drachmas.” Interest among Forex traders makes sense as last month currency ECN exchange ICAP stated that they were ready to add drachma’s to their trading network in the event of a return to the drachma (Flair For The Drachma-tic: ICAP Preparing For Return Of Greek Currency). Also, in the beginning of June, Business News source Bloomberg, was doing tests with the drachma, which led to traders seeing drachma symbols on their terminals for a brief period of time (Bloomberg Tests Post-Euro Greek Drachma Code).
Currently though, other than taking bets on Greek bonds which Greylock Capital president Hans Humes has called the “trade of the year,” direct investment in the drachma is limited to taking bets on assets that could be converted to drachma’s, rather than having an actual method to bid now for future drachmas.
Taking an alternative direction is Naftilia Asset Management, a Cayman Islands hedge fund being managed in Dubai and Greece. The fund set up a Greek Opportunity Fund whose sole focus is to invest in Greek stocks which it believes are undervalued if Greece manages to stay in the EMU. Naftilia is headed by manager George Elliott. Elliott believes that Greek stocks are currently trading based on the assumption that the drachma will return which would cause shares to revalued in drachmas rather than shares. As such, will a belief that Greek will continue to stay with the Euro, Elliott is expecting a tremendous buying opportunities in shares as they get revalued by the markets.
Return to Drachma’s
Even in the event that Greece does leave the EMU and return to drachma’s Naftilia sees tremendous potential in Greek stocks whose primary businesses are selling their products outside of Greece. Such companies could rally as their core revenues would be protected from drachma weakness. Nonetheless, with Greece shares being sold across the board, it has set up potential upside trades for Naftilia.
Overall, like Hedge Funds that are out buying Greek bonds, the premise with Greece’s equities is that the sharp selling has led to a favorable risk versus reward potential for patient and selective investors.
Elliot himself, compares buying Greek shares to buying shares of Apple during its troubled times, and investing in Russia and Argentina following their defaults. Only time will tell whether Naftilia and Elliot’s views will pan out, however, for investors seeking a way to find opportunities in Greece’s financial crisis, Naftilia’s Greek Oppurtunity Fund offers a managed fund product to invest in.