Why the government intends to upgrade the Athens Stock Exchange

Why the government intends to upgrade the Athens Stock Exchange

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One of the main goals of the government is to upgrade it Stock Exchange of Athensas the prime minister pointed out Kyriakos Mitsotakis in his message to the largest fund managers in the world, at the recent investment conference organized by Morgan Stanley in partnership with AX in London.

In his message, Kyriakos Mitsotakis outlined: “A few years ago, I promised that Greece would regain its place at the investment level – and last year, that happened. Today, I am here to tell you that Greece is in way for a new milestone: the upgrade of the Athens Stock Exchange to developed market status.

Upgrading the Stock Exchange in developed markets is our big goal, recently emphasized by the Managing Director of the Athens Stock Exchange, Mr. C. Kontopoulos, during the presentation of the new corporate identity of HEXA. With the upgrade, the prestige and image of AX will be strengthened, which will attract more investment funds. Listed companies have access to large funds, which invest in developed markets, strengthening the growth of the Greek economy.

Much discussion was caused by a previous report by JP Morgan according to which Greece would be better off staying in the Emerging Markets.

First in the village or last in the city? The “answer” of the CEO of the Athens Stock Exchange Group, Mr. C. Kontopoulou, what he wants to give is: “A Super League 2 team that is in the first positions has the goal of going up to Super League 1”.

Over the past two years, AX management has been working on the goal of upgrading the Greek market, to achieve this in the next 12-18 months, with the aim of attracting additional investment funds. , because AX is already on a watchlist of upgrades FTSE Russell and S&P DJI for the upcoming reclassification to the developed markets category.

FTSE and S&P put the Athens Stock Exchange at the forefront of the developed markets upgrade, as they included it in the 2025 watch list, when the final decision will be made on its return to the category of developed markets. It should be noted that AA receives ratings from three agencies, MSCI, FTSE and S&P.

Each sets its own terms and conditions for participating in mature markets. MSCI, in its recent assessment, did not continue to include the Greek stock market in the “watch list for upgrading”. It is worth noting that 70% of the funds follow the MSCI indices, which makes the upgrade from the MSCI house a critical factor.

MSCI is the most important index, because it has assets of 12 trillion. dollars, while he is watched by the biggest international houses and influences the most serious investment portfolios.

The inclusion of indices in developed markets will further strengthen the liquidity and depth of the Greek market, creating a “virtuous circle” that will contribute to the development of Greek businesses and the Greek economy in general.

The Greek stock market is the only Eurozone stock market that has been downgraded 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.

AA’s return to the developed markets is a bet of great importance for the Greek stock market, which, due to the great economic crisis and the reduction of the country’s debt, has lost its position in the indices in developed markets, with the result that since then the Greek market has only taken funds from a small “pool” of investment portfolios and hedge funds placed in emerging markets, which is negative which affects the trading activity and share valuations.

Among the positives of the upgrade, we must also mention the difference in funds sold in developing and developed markets. About 2 trillion dollars were sold in the first category and about 15 trillion in developed ones. Therefore the “pool” of capital in developed markets is larger.

Much discussion was caused by a previous report by JP Morgan according to which Greece would be better off staying 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. .

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.

JP Morgan estimates that if there is an upgrade in the Greek stock market, there will be outflows of 1.83 billion. dollars due to exits from the FTSE Emerging Market index and flows of 1.75 billion due to entry into the indices of the FTSEDeveloped Market indices. Therefore, the balance will be negative, ie outflow of approximately 75 million. euros.

According to Axia Research IG credit rating is particularly important for the active flow, while the situation in developed markets is more relevant for the flow of funds track indicators (indexed funds, mainly 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.

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