By contrast, Pioneer Investments, an Italian asset manager owned by UniCredit, said that a Greek exit is a possibility but not the base case scenario. Pioneer, which is long Italian and Spanish debt, also suggested that bold political action could avert any knock-on effects it would have on financial markets.
Tsapouris of Coutts said that government bond markets have already begun to price in the risks of a Greek exit, as UK gilts, US Treasuries and German bunds are all trading near all-time low.
“For euro-referenced investors, we continue to favour diversification into both dollar and sterling assets, as well as looking for opportunities to boost exposure to emerging- market currencies,” said Tsapouris. “Moreover, within existing euro exposure, we believe modest weightings in carefully selected European stocks is warranted, given the cheap valuations of key multi-national companies,” he said.
“I would imagine the wealth management industry has considered this risk,” said Gary Reynolds, CIO of Courtiers. “For those that do nothing about it, [it would be] very severe. For those that take precautions, it may be just mild. But if you are long Greek bonds on the exit – pray!”
At Schroders, the UK-listed investment and private banking house, a key concern would be the imposition of credit and other capital controls by Greece in the event of a euro exit.
would expect the new drachma to depreciate by anywhere from 30-70 per cent. It
is also possible that the authorities would peg the exchange rate at a
set rate to the euro," Robert Farago, head of asset allocation, Schroders Private Banking, said.
is likely that capital controls will be imposed to put an end to the
flow of money out of the country. This is against the rules of the
European Union and therefore the
country may have to leave the Union, either temporarily or permanently," he continued.
day that Argentina allowed its currency to devalue at the end of 2001
marked the start of that country’s recovery. This is likely to prove
true in Greece too. Exports of
goods and services account for a quarter of annual output and would be
significantly boosted by the currency depreciation. However, the initial
outlook is uncertain as the political situation is extremely
unpredictable, with none of the parties that have ruled
in the past maintaining any credibility and none of the alternatives
offering a convincing alternative," Farago added.
At Crossbridge Capital, the firm puts the risk of Greek euro departure in the next six months as less than 30 per cent but greater than 50 per cent over the next 12 months.