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Sunday, December 8, 2019

Financial Investors And Others

"London road shows prove investor interest", titles the Ekathimerini. "Foreign portfolios view Greek assets as serious investments", the article continues. This is certainly good news for the Greek stock market. To what extent it is also good news for the real Greek economy remains to be seen.

I have argued for a long time that financial investors should not be the primary target as Greece strives to attract foreign capital. Financial investors have only one interest: risk-adjusted yield. A relatively small economy with free international capital flows can very quickly become victim of financial investors. Their money is 'hot money'. It comes quickly but it can also leave very quickly. And when it leaves quickly, it typically leaves chaos behind.

The primary target of Greece's attempt to attract foreign capital should be investors who can transfer technology and know-how; investors who are builders and not speculators; investors who have a long-term strategic vision and not a cash-out mentality. Cosco would be a prototype of such an investor.

I am not sure that road shows in London or elsewhere are the best strategy for the Greek government when it comes to attracting the right kind of foreign investment. Instead, the Greek government should analyze which sectors of the economy hold the best potential for development. Then it should analyze which foreign companies are not only leaders in that sector but also are prepared to take a long-term strategic vision. Again, Cosco would be a good example.

And then the Greek government, instead of arranging road shows in London or elsewhere, should call on the headquarters of the Cosco's of the world, present to their CEOs and take it from there.

Investments in the stock market do not necessarily create jobs. A new plant for, say, pharmaceutical products certainly would.