It’s no secret that Greece’s economy is a mess. In the country’s sixth year of recession, unemployment is nearing 27% and 64.2% of young people are out of work. But there are signs of improvement, and investors are taking note.
In a rare victory for today’s advanced economies, this week Fitch Ratings upgraded Greece’s long-term sovereign debt rating from CCC to B- (still a couple of ranks below investment grade). ”The Greek economy is rebalancing: clear progress has been made towards eliminating twin fiscal and current account deficits and ‘internal devaluation’ has at last begun to take hold,” the agency said in a press release.
Those economic reforms make Greek corporate debt, a highly speculative bet when we first mentioned it in November, look more attractive (paywall). As a result, more hedge funds and private equity groups are piling in. Last month, Dan Loeb’s Third Point told its investors that it was starting a hedge fund focused on investing in Greek corporations. Oaktree Capital Group, Fortress Investment Group, York Capital Management, Dromeus Capital, LNG Capital and CQS have all been buying Greek corporate bonds. Meanwhile, Morgan Stanley is urging clients to buy Greek government bonds (paywall), arguing that private investors wouldn’t take the hit if Greece defaulted again.
Of course, as Fitch noted, the country could easily be blown off course by political or economic headwinds elsewhere in Europe. But if the investing craze continues along with steady reforms, Greece’s economy could enjoy some real gains.