With the Greeks finally rejecting the tough bailout deal in the referendum held on Sunday, the possibility of Greece exiting the Euro zone comes closer than ever before. The result of the referendum showed that about 61.3% had voted ‘No’ compared to just 38.9% ‘Yes’ votes.

Though the outcome of the referendum is still unclear, it has raised the specter of the country falling into the worst financial crisis putting the fate of its Euro zone membership in jeopardy. This could further result in a full-blown crisis in the Euro zone (read: Grexit or Not, Buy These 3 European ETFs).

Is ‘Grexit’ Finally In the Cards?

Whether Greece will or will not leave the 19-nation Euro zone is a multibillion dollar question. It largely depends on the European Central Bank (ECB) and German Chancellor Angela Merkel as well as the efforts made by the prime minister Alexis Tsipras to reach a deal.

The ‘No’ vote has strengthened the negotiating power of Tsipras to secure a better deal with its creditors, namely the IMF, European Union and ECB. The government’s first priority is to restore financial stability in the banking system, which has been on the verge of collapse following the shutdown of the country’s banks last week and the imposition of capital controls.

Greek officials are seeking to resume fresh deal talks within the next 48 hours. In fact, Angela Merkel and the French President Francois Hollande will meet on Monday to discuss the consequences of the referendum and the strategy to avoid a potential Grexit ahead of the emergency summit of Eurozone leaders called for Tuesday.

However, after the ‘No’ vote, the ECB is expected to maintain its emergency funding for Greek banks at current restricted levels, suggesting that the tight funding will soon result in Greece running out of money and a collapse of the banking system. This is especially true as the next €3.5 billion ($3.9 billion) payment to the ECB is due July 20, which is infeasible until a deal is sealed (read: If Greece Defaults, Buy These 4 ETFs to Profit).

This situation might be dire for the Greek economy forcing it to the return to the drachma, the Greece currency of yore used until 2001, and leave the Euro zone. If Grexit ultimately happens, it will push the entire European Union to its worst crisis since the formation of the euro.

Here is a quick snapshot of analyst forecasts – JPMorgan Chase and Barclays are anticipating departure of Greece from the EU while Goldman and Citigroup see the future of Greece in the bloc.

ETFs to Watch

Though the worsening Greece crisis continues to have a ripple effect on the global markets, a few ETFs will be hit much more badly than the others. Investors would do well to keep a close watch on these likely underperformers. On the other side of the coin, it will continue to propel demand for lower risk securities and safe haven bids.

ETFs to Lose

Global X FTSE Greece 20 ETF ((GREK - ETF report))

The Greece ETF was the worst performer last week, losing over 9% and trading in huge daily volumes of around 1.1 million shares on average. The fund tracks the FTSE/ATHEX Custom Capped Index and is home to a small basket of 30 companies. It is heavily concentrated in the top firm – Coca Cola HBC – at nearly 21.4% while other firms make up for less than 10.4% share.

Financials takes the top spot at 24% in terms of sector holdings, followed by consumer staples (21%), telecom (11%) and consumer discretionary (11%). The product has AUM of $321.9 million and charges 61 bps in fees per year from investors.

SPDR EURO STOXX 50 ETF ((FEZ - ETF report))

This fund follows the EURO STOXX 50 Index, which measures the performance of some of the largest companies across the components of the 20 EURO STOXX Supersector Indexes. The fund appears rich with AUM of $4.7 billion, and average daily volume of more than 2.6 million shares. Expense ratio came in at 0.29% (see: all the European ETFs here).

Holding 54 securities in its basket, the product is pretty well spread out across components with no firm making up for more than 4.81% of assets. The ETF is skewed toward financials, as it takes more than one-fourth of the total assets, while the other sectors receive modest exposure. In terms of country allocations, France and Germany are leading with 35.1% and 31.2% share, respectively, followed by Spain (12.9%). The fund was down 4.5% over the past one week.

ETFs to Gain

DB German Bund Futures ETN (BUNL)

After a recent sell-off, German bonds and the related ETFs could show an impressive rebound given its safe haven nature. The fund looks to provide investors exposure to the U.S. dollar value of the returns of a German bond futures index, replicating the performance of a long position in Euro-Bund Futures. The underlying assets of Euro-Bund Futures are Federal Republic of Germany government issued debt securities (Bunds) with a remaining term to maturity of not less than 8 years and 6 months and not more than 10 years and 6 months as of the futures contract delivery date.

The product has amassed $9.3 million in its asset base while it sees light volume of under 3,000 shares. The expense ratio came in at 0.50%. The note is up only 0.6% over the past week and has a potential to move higher as long as the Greece turmoil persists (read: Inside the Germany ETF Sell-Off).  

SPDR Gold Trust ETF ((GLD - ETF report))

Gold is often viewed as a store of value and a hedge against market turmoil. The product tracking this bullion could be an interesting pick to play the market turbulence. The fund tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $26.6 billion and an expense ratio of 0.40%. The fund trades in heavy volume of over 6.2 million shares a day and was down 0.6% over the past week.

ProShares Short Euro ((EUFX - ETF report))

This product seeks to deliver the inverse exposure to the daily performance of the euro versus the U.S. dollar. It is often overlooked by investors as it has just $19.5 million in its asset base while volume is light at less than 11,000 shares per day. It charges 95 bps in annual fees and has added about 1% over the past week.