After recovering the investment grade, an important station for Stock Exchange of Athens (XA) is its upgrade to the developed category procurement. However, it seems that he is still far away.
MSCI denied on Thursday (20.6.2024) any expectations for the inclusion of the Greek stock market in the “watch list for upgrading”, with the final classification of the Athens Stock Exchange from developing developed markets occurring in 1.5 to 2 years.
It should be noted that AXA receives ratings from three agencies, MSCI, FTSE and S&P. Each sets their own terms and conditions for participating in mature markets.
It is also worth noting that 70% of the funds follow the MSCI indices, which makes the upgrade of the MSCI house a critical factor in evaluating the criteria for AXA’s transfer to the developed market conditions.
However, the management of the Stock Exchange estimates that within this year a house will include the Greek stock market on the watch list. Of course, even if this is done, a period of time of up to 24 months is needed to announce the transition from emerging markets.
Much discussion has been caused by a report by JP Morgan according to which Greece should stay, or better stay in the Emerging Markets. According to House analysts, the Greek stock market has only three parts (Ethniki, Eurobank and OPAP), which qualify for the MSCI Europe index, while in the case of reclassification it is the smallest Market in MSCI Europe, behind Portugal and Austria.
According to MSCI˖ rules for market classification 5 stocks must meet the market capitalization/liquidity criteria which are: market cap of $5.8 billion for MSCI Europe and free float of $2.9 billion. However, JP Morgan refers to the event when Greece was upgraded in 2001 and market interest dropped and wondered if something like this would also happen in the next upgrade.
The Greek stock market is the only stock market in the Eurozone to be down since 2013 and is found from Developed Markets to Emerging Markets.
On Wednesday, June 12, 2013, the Greek stock market was lowered by the most important rating index in the world, MSCI, with assets of 12 trillion. dollars, followed by the largest international houses. A similar downgrade has not occurred for any other developed stock market.
The return of AX to the developed markets is a bet of great importance for the Greek stock market, which, due to the great financial crisis and the decrease in the country’s debt, has lost its position in the indices of developed markets, with the result that since then the Greeks who raise funds buy only from a small “pool” of investment portfolios and hedge funds placed in emerging markets, which negatively affects trading activity and stocks valuations.
In developed markets, assets under management reached $52 trillion, compared to just $6.3 trillion. dollars in emerging markets. It should be noted that “passive” funds invest approximately 88% in Developed and only 12% in Developing.
At the same time, there is a question mark about the funds that will enter the Greek stock market after the possible transfer of the club to developed markets.
According to Axia Research IG credit rating is particularly important for active flows, while the situation in developed markets is more relevant for flows of funds that track indexes (indexed funds, first in ETFs). However, since the majority of investment funds (62% of the total) are still not indexed, this means that most funds can invest in Greece after the investment grade upgrade rather than in developed market conditions.
Also, passive funds linked to developed market conditions represent only 14% of invested assets in the EU, meaning that they are not very important in the overall picture. Therefore, Axia emphasized, the investment tier will bring most of the incremental inflows to AXA