Year of the PIIGS? Greece leads 2014 stock market league table

Portugal, Italy, Ireland, Greece and Spain have been the best performers in Europe so far in 2014

By Kyle Caldwell4:15PM GMT 25 Feb 2014

The Telegraph

Backers of the UK stock market are celebrating a steady start for the FTSE 100 in 2014 and a challenge of its 1999 all-time high of 6930. But its marginal gain of 1.3pc since the start of year is dwarfed by gains from some of the eurozone's most troubled economies.

Data from Russell Investments, an asset management firm, show Portugal, Italy, Ireland and Greece have been the best performers in Europe so far in 2014.

The firm runs a number of country specific index funds, which track the performance of a stock market. Out of its sixteen eurozone indices, Greece has returned the most so far this year, up 9.4pc. In second and third place is Portugal and Italy, up 8.5pc and 8.3pc respectively.

Spain has, however, lagged behind, but has matched the average country return of 2.3pc.

Shares in these troubled economies have endured a torrid time in recent years, but last year Ireland and Greece staged a comeback and were two of the best performing stock markets, both returning 35pc.

Some fund managers are even suggesting these countries, with valuations still low, are a good long-term bet (see below). It is only three years ago that some were on the verge of going under.

The case is argued by a number of respected fund managers who have been ploughing money into shares listed on stock exchanges in Portugal, Italy, Greece and Spain. These four nations were labelled the "Pigs" - or Piigs with Ireland included - by economists during the depths of the financial crisis.

But despite debt levels and unemployment numbers remaining high in each country experts argue shares in these countries are cheap compared to other more stable European economies, such as Germany, and therefore offer the potential of greater returns over the long term.

Wouter Sturkenboom, an investment expert at Russell Investments, said it was early days but the performance of peripheral economies over the past two months signalled these nations were back in favour with investors.

He said: “The strong returns so far this year from Greece, Portugal and Italy indicate investors are more confident about putting money into shares that are listed in these regions.”

Country (Russell index)

2014 year to date (Feb 20)

Greece                                     9.4%

Portugal                                   8.5%

Italy                                         8.3%

Ireland                                     7.6%

Austria                                    4.6%

Spain                                       2.3%

France                                                 1.9%

Finland                                    1.5%

Netherlands                             1.5%

Germany                                 1.1%

Luxembourg                            -2%

Russell Eurozone Index          2.3%

The funds backing the 'Pigs'

Investing in these markets is not for the faint hearted, experts warn. Although shares are trading on cheap valuations in each region, the risk of losing money is high so only invest a small portion of your Isa allowance if you are prepared to take a gamble.

Juliet Schooling Latter of Chelsea Financial Services, the fund shop, said brave investors needed to take a very long view to back European funds.

She highlighted Franklin European Opportunities and Argonaut European Alpha as two funds that were currently taking big bets on the Pigs.

Barry Norris, fund manager of the Argonaut European Alpha fund, owns Greek banks, including the National Bank of Greece and Piraeus Bank, which is owned by the Greek government. Both banks nearly went under in 2012 due to the county’s precarious finances and only survived after being bailed out by European member states.

But Mr Norris argues Greece could be the best investment punt for sophisticated investors in 2014.

"The best time to invest in a country is often when its economy is emerging from recession and all of the bad news is in the rear view mirror,” said Mr Norris.

Alternatively investors could also buy a tracker fund, which aims to replicate the performance of a given stock market. There are a number of tracker funds from providers such as BlackRock, Vanguard and Russell Investments that follow the fortunes of shares listed on peripheral European economies.

http://www.telegraph.co.uk/finance/personalfinance/investing/10659948/Year-of-the-PIIGS-Greece-leads-2014-stock-market-league-table.html