Managers stay sceptical in spite of Greek election
Discretionary fund managers warn the positive Greek election result will not solve the sovereign debt crisis in Europe.
Discretionary fund managers have warned that the positive Greek election result will do little to calm investors’ concerns in the longer term, particularly over troubled euro member Spain.
Andrew Morris, managing director of Signature, said “little has really changed” after Greece’s pro-bailout New Democracy party won the largest share of votes in the June 17 election.
Mr Morris said that if the terms of Greece’s bailout were not softened, the country’s position in the eurozone remained “worse than precarious”.
“The eye of the storm has already passed over Greece and moved on to a much more worrying target in Spain,” he said. “There is every reason to believe that we will shortly discussing a Spanish bailout.”
Following the Greek election, Spanish 10-year government bond yields once again rose to the 7 per cent threshold that is considered unsustainable. They were trading at 7.15 per cent at the time of going to press.
Kevin Gardiner, head of investment strategy for Europe, the Middle East and Africa at Barclays Wealth, agreed the election results were not a “definitive answer” to questions over Greece’s fate.
Mr Gardiner said the election was “just another staging post” in the struggle against contagion. He said a wider fiscal and banking union in the eurozone would be needed to stave off the debt crisis.
“This requires better budgetary discipline and structural reform in the peripheral economies – developments that will take years, not weekends,” he said.
In particular, Mr Gardiner added that the indebted Spanish banking sector was large enough to threaten the single currency and said the crisis “hangs on” drastic fiscal and monetary moves from the European Central Bank to “circle the wagons around those banks and limit contagion”.
Kevin Doran, senior fund manager at Brown Shipley, said markets would have to await the outcome of a meeting of the G20 to determine whether there was enough political will to pull Greece, and the eurozone, out of its economic morass.
However, Stewart Richardson, chief investment officer at RMG Wealth, said his concerns over the eurozone would remain – even if the eurozone’s strongest economy Germany were to step up and do more to bail out the monetary bloc.
“Why is doing more of what they have been doing for the last two years and more – trying to buy time without any real reforms – bullish?” Mr Richardson said.
“In fact, if Germany does step up and promise to bail everyone out, then they risk being infected by the crisis as well.”
More on Discretionary Management
- Ashcourt Rowan outsources asset management
- Brooks Macdonald adds to investment team
- DFMs slash emerging market debt weightings