Do you remember the market panic when Greece first looked like defaulting on its Euro debts?
I do – distinctly – because I'd just bought a bunch of cheap stocks before watching the S&P/ASX 200 (INDEXASX:XJO) plunge 25% from nearly 5000 to below 4000. Ouch. At the time the Greek crisis was the only show in town, plastered across all the headlines.
Four to five years later, when it looks like Greece could really exit the Eurozone for good, the Australian market is just ho-hum.
We've seen it all before, after all.
But the main German and French indices dropped 2% each in a single day yesterday, and there'll be plenty more where that came from if Greece and its creditors can't agree on a funding plan which – according to Fairfax media – needs to be agreed this week at the latest in order to give everyone involved time to vote on the arrangement.
Foreign markets may not hold a lot of appeal for some Australian investors, many of whom are still coming to terms with owning Australian companies and find unknown foreign companies alien and confusing.
I don't own any foreign-listed companies myself, but a potential 'Grexit' is too great an opportunity to pass up. There are a number of ways to play the situation, and it's possible to gain 100% Eurozone exposure from the safety of the ASX.
The first opportunity I'm eyeing off is the Australian iShares Europe Exchange Traded Fund (ETF), also known as ISHEUROPE CDI 1:1 (ASX:IEU). This ETF tracks 350 stocks diversified by region and is a great way to catch a widespread fall in Eurozone markets.
IEU dropped as low as AU$32 in the wake of the last Greek crisis and while I don't expect it to go as low now, prices of $40 or so ($64 currently) look like an attractive long-term entry point. More importantly, Euro nations are far more robust thanks to the economic recovery of Spain, Ireland, and Italy, which reduces risk substantially.
A more direct way to gain pure Euro currency exposure without the equities is the BetaShares Euro ETF (ASX: EEU), which is designed to mirror the AUD-EUR currency relationship. Theoretically if the Euro falls 10% against the AUD, this ETF should fall too. Of course this is an investment to buy AFTER a Greek exit happens.
The iShares ETF currently has a management fee of 0.6% per annum, while the BetaShares Euro ETF charges 0.45%.
Alternatively if you're not feeling quite that adventurous you can try owning Australian shares that have significant earnings in the Eurozone. It's less likely that these shares will fall in the event of a Greek dramas but even so; Brambles Limited (ASX: BXB) earns one third of its revenue in the Eurozone. Westfield Corp Ltd (ASX: WFD) earns a similar and growing percentage, while Domino's Pizza Enterprises Ltd. (ASX: DMP) is also expanding in the region.
This time around I'm not expecting Greek problems to have a major long-term impact on Australian markets. But the possibility of a crash is no doubt on the minds of many investors who recall the GFC, and look at the lofty valuations of many ASX-listed companies with some discomfort.
