Greece provides route into emerging Europe for SWIP

Greece is one of the key routes into emerging Europe for Scottish Widows Investment Partnership’s (SWIP) European equity funds.

Several Greek companies are already positioned to benefit from expansion into the growing Balkan and South Eastern European markets and continue to drive performance in SWIP’s European funds.

Companies well positioned to benefit from growth in consumer spending in the Balkans and South Eastern Europe include toy retailer Jumbo and Fourlis, which operates the IKEA franchise in Greece, Cyprus and Bulgaria and is the only listed means of investing in the IKEA brand.

Steven Maxwell, Head of European Equities at Scottish Widows Investment Partnership (SWIP), comments: “Greek companies have moved very early into the Balkans and South Eastern European markets and are well positioned as these markets develop. The Balkans are illiquid and volatile investment markets and, as there are much fewer stocks, they are more aggressively priced. By accessing these markets through well managed and established Greek companies, we can be confident that we are investing in established businesses with lower risk profiles.”

The recent election in Greece is a strong vote for further reform and liberalisation according to SWIP. The recently re-elected Karamanlis government is expected to continue its progress on economic reforms. The government has already cut corporate taxes and is about to cut personal taxes which SWIP expects to benefit consumer spending.

Consumer growth is also expected to be given a boost from strong job creation in the construction sector. The next wave of the EU infrastructure programme is due to commence at the end of this year, and this should strongly underpin the country’s economic growth as well as benefiting the country’s construction sector.

Maxwell adds: “The Greek government has overseen a period of strong economic expansion, bringing the government deficit within reach of the Maastricht criteria for the first time in years and reducing unemployment from 11% to 8% over the past four years. There is very strong consumption led growth in Greece currently and the cut in personal taxes will boost this further. As a result, we believe there are several consumer stocks with strong growth potential.”

“Greek stocks in the fund have not been heavily impacted by recent market volatility as consumer spending remains strong and the financial sub-prime issues have not had any impact in Greece, where mortgage levels are lower and financial products less complex than elsewhere in the EU. This has enabled stocks such as National Bank of Greece to remain strong during recent market turbulence.”