Here’s a chart from Nomura:
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Coca-Cola Hellenic Bottling SA — a pretty unexciting play on the Eastern European soft drinks market. Volume growth a bit flat. Only eight per cent of profit is Hellenic.
Two big operators in foreign exchange markets are preparing for scenarios in which some eurozone members return to their previous currency, says the WSJ. ICAP said it was preparing its electronic trading systems for a possible return of the Greek drachma. CLS Bank International, which operates the largest forex settlement system, said it was running “stress tests” to prepare for a euro break-up, the newspaper also reported, citing people familiar with the matter. The FT says Icap’s move follows discussions with clients – largely dealer banks – and third parties such as CLS, a settlement system for currency trades, about the need to be prepared for “any number of possible outcomes”, said Ed Brown, executive vice-president of business development and research at Icap Electronic Broking.
European leaders suspended an overdue tranche of €8bn in international aid to Athens and demanded Greece make a clear decision on whether it wanted to leave the eurozone at a dramatic meeting on the sovereign debt crisis on Wednesday night, the FT reports. Under strong pressure from Nicolas Sarkozy and Angela Merkel, George Papandreou agreed to bring forward a planned referendum on the issue to as early as December 4. He said the referendum would be about Greece’s continued membership of the eurozone, not just about €130bn rescue plan agreed late last month. “This is not a question of only a programme,” Mr Papandreou said. “This is a question of whether we want to remain in the eurozone.” The timing and wording of the referendum were key demands made by Mr Sarkozy and Ms Merkel, who said after the meeting in Cannes on the eve of the G20 summit of leading global economies that it was essential that Greece fulfilled the commitments it had made in Brussels. The two leaders, grim-faced at a joint press conference, for the first time openly raised the prospect of Greece leaving the single currency. “The question is whether Greece remains in the eurozone, that is what we want. But it is up to the Greek people to answer that question,” Mr Sarkozy said. Mr Papandreou “believes that he can win a referendum by phrasing the question as a matter of Greece’s destiny as a member of the European family of nations”, the FT’s World Blog says, citing sources close to the ruling Pasok party. The WSJ says a “no” vote is a real possibility, given the unpopularity of austerity measures. Meanwhile the IIF, which represents key bondholders, criticised the eurozone debt plan and said banks would not consider providing debt relief to other countries such as Portugal caught up in the crisis, Bloomberg reports.
If you’re trying to price political risk perfectly… you’re doing it wrong, we’d submit. The Greek referendum’s a case in point.
The referendum came out of the blue. It might not even go ahead, pending a government collapse or early elections. So, surely there’s not much point seeking to get in front of the truck (so to speak) on Greek politics at this point? The truck’s already run you over once before, with the referendum. Read more
Also: think about the governing law of your government bond when a currency union is collapsing. Willem Buiter of Citigroup on Tuesday, exploding a certain meme:
A Greek exit is indeed often viewed as ‘euro-positive’ in the narrow sense of likely to be associated with a strengthening of the effective exchange rate of the euro – mainly because it eliminates the prospect that a sovereign default in Greece would entail the risk of part-monetisation of Greek government debt by the ECB. Read more