The recent announcement by STOXX regarding Greece's upgrade from an emerging market (EM) to a developed market (DM) starting September 22 was presented as a positive development. However, according to analysis by JPMorgan, the reality is more complex—and in some respects, worrying for the future visibility of the Greek market.
The decision was no surprise, as Greece was already on a watch list for a potential upgrade. JPMorgan estimates inflows of nearly $1 billion (approximately $957 million), primarily due to the inclusion of Greek stocks in indices such as the STOXX Europe 600. However, this positive picture mainly concerns short-term capital flows rather than the country's overall standing in international markets.
Banks at the center—but not the real economy
Nearly 90% of the inflows are expected to be directed toward the four major Greek banks through their inclusion in the STOXX Banks index (SX7E). Conversely, non-banking companies will see minimal benefits, with inflows not exceeding $30 million per share. This creates a distorted image: the "upgrade" bolsters a limited sector of the market without reflecting broader, balanced growth.
Short-term boost, long-term doubt
JPMorgan recognizes that the timing—following market corrections and volatility due to geopolitical tensions such as the war with Iran—provides fertile ground for such "catalysts." However, these are technical moves and not a fundamental strengthening of the market. Furthermore, the need for external demand is evident, especially given PPC’s (DEI) effort to raise €4 billion from the market. This indicates that domestic momentum is insufficient.
The great contradiction
Herein lies the core of JPMorgan’s critique. While the STOXX upgrade is considered positive, the corresponding transition of Greece to developed market status by MSCI in 2027 is viewed clearly as a negative. Greece is expected to have only 6 stocks in MSCI Europe (down from 8 currently in the emerging market indices), representing a mere 0.38% of the index—a share smaller than countries like Austria and Ireland. Most critical, however, are the outflows: net outflows of $220 million are estimated, as the DM transition inflows ($161 million) will not suffice to offset the outflows ($381 million).
From "country story" to "sector footnote"
The essence of the critique is that Greece risks becoming lost within the large European indices. From a market that attracts investors based on a country story (as an emerging market), it is transforming into a minor presence within pan-European sector indices. This means less attention, less coverage, and ultimately less investment interest. JPMorgan even recalls previous experience: when Greece was upgraded to developed market status in 2001, investor interest declined dramatically.
Macroeconomic stability, but not enough
On a macroeconomic level, the picture remains positive, with growth rates higher than the Eurozone average and political stability under the New Democracy government. However, this is not enough to compensate for the structural changes brought about by the index upgrades.
A "window dressing" upgrade
Greece's upgrade to developed market status may be presented as a vote of confidence, but JPMorgan’s analysis reveals a less encouraging reality: more "window dressing" and less substance. In an environment where investor attention is crucial, Greece risks moving from the spotlight to the sidelines—and that may be the real cost of the upgrade.
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