Your administration stock Exchange estimates that later this year a house will include the Greek stock market in the watch list, despite the negative developments observed last Thursday by MSCI. It should be noted that AA receives ratings from three agencies, MSCI, FTSE and S&P. Each defines its own terms and conditions for entering mature markets.
However, AA’s non-adherence to the MSCI watch list is of fundamental importance, as 70% of funds follow MSCI indices, making updating by the specific house a critical factor in evaluating the criteria for AA’s transition into status. developed market. If FTSE or S&P place Athens on a watch list by the end of the year, it will take up to 24 months to announce the transition from emerging to developed markets.
JP Morgan’s Oracle
Much discussion was provoked by a report from JP Morgan, according to which Athens will remain or would be better off remaining in emerging markets.
According to the company’s analysts, the Greek stock market has only three actions (Ethniki, Eurobank and OPAP), which have quality for the MSCI Europe index, while in case of reclassification it would be the smallest market in MSCI Europe, behind Portugal and Austria.
According to MSCI market classification rules, 5 stocks must meet the market capitalization/liquidity criteria, which are: market capitalization of US$5.8 billion for MSCI Europe and free float of US$2, 9 billion. However, JP Morgan refers to the fact that when Greece was modernized in 2001, interest in the market plummeted and questions whether something similar will happen in the next modernization as well. The Greek stock market is the only eurozone stock market that has been downgraded since 2013 and moved from developed markets to emerging markets. On Wednesday, June 12, 2013, the Greek stock market was downgraded by the world’s most important rating index, the MSCI. A similar downgrade has not occurred in any other developed stock market.
The return to developed markets is a very important bet for the Greek stock market, which, due to the great financial crisis and the degradation of the country’s debt, lost its place in the developed market indices, meaning that since then, the Greek market has only it withdraws funds from the small “pool” of investment portfolios and hedge funds placed in emerging markets, which negatively affects trading activity and stock valuations. In developed stock markets, assets under management reach 52 billion. USD, compared to just $6.3 trillion in emerging markets. At the same time, there is a question mark over the funds that will enter the Greek stock market following a possible transfer to the developed markets club.
Important review
According to Axia Research, IG credit rating is particularly important for active flows, while developed markets status is more relevant for flows of index-tracking funds (index funds, mainly ETFs). However, since the majority of investment funds (62% of the total) are not yet indexed, this means that the majority of funds can invest in Greece after moving to the investment category, rather than to the status of developed market. Furthermore, passive funds linked to developed market status represent only 14% of the assets invested in the EU, meaning they are less important to the overall picture. Therefore, emphasizes Axia, the level of investment is the one that will bring the most incremental flows to AX