The announcement by MSCI regarding the commencement of a consultation for the potential upgrade of Greece from emerging to developed market status, with a tentative implementation in August 2026, was received almost triumphantly by a large portion of the market. However, JP Morgan is stepping in to ground investors, warning that this upgrade not only fails to guarantee inflows but may actually work against the overall health of the Greek stock exchange. In essence, the American bank argues that Greece risks being "upgraded" in name but effectively downgraded in the eyes of international investors.
A small market
According to calculations by JP Morgan, Greece would join the MSCI Europe with only five stocks, compared to eight currently in the emerging markets index. The country's weighting would be limited to a mere 37 basis points, making it the second smallest market in the index, larger only than Portugal and smaller than countries such as Ireland and Austria. The drop is striking: from over 4% in the MSCI EMEA EM to less than 40 bps in the MSCI Europe and just 6 bps in the MSCI World. Simply put, Greece transforms from a "visible" market into a statistical footnote.
Less attention, less research, less money
JP Morgan warns that this drastic reduction in weighting will have immediate consequences:
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less interest from investors,
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a downgrade in analytical coverage,
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fewer reports and lower research quality. The shift from an emerging markets investor base, which focuses on countries, to a pan-European developed markets base, which operates strictly on sectoral criteria, leaves Greek stocks exposed. No Greek listed company is a "front-line player" within its European sector. Specifically, it mentions National Bank, which, from being the largest Greek stock, would become merely the 58th largest financial institution in the MSCI Europe. Public Power Corporation (PPC) would be ranked among the smallest utility companies in Europe. In such an environment, Greece does not compete with Germany or France but simply struggles not to be ignored.
Upgrade with net outflows
The most troubling—and most revealing—element of JP Morgan's analysis is that the upgrade is accompanied by net outflows of approximately $500 million. The cause is purely mechanical. Stocks exiting the MSCI EM experience outflows of about 8% of their market capitalization, while stocks entering developed market indices attract significantly smaller inflows, in the range of 75–100 basis points. The result is a negative balance, despite expectations of a "golden rain" of capital. Even in a positive scenario where OPAP manages to meet the entry threshold, outflows are merely reduced, not eliminated.
The 2001 lesson the market is ignoring
JP Morgan recalls something the Greek market seems to have forgotten: in 2001, when Greece was upgraded to a developed market, investor interest collapsed. The question remains relentless. Does Greece today possess something it did not have then? Can it truly garner more interest than markets like Norway, Austria, or Ireland? JP Morgan’s own answer is staggering. According to its European strategy team, the total number of inquiries they received over the past year regarding the markets of Norway, Ireland, Austria, and Portugal combined was fewer than five.
The uncomfortable truth
The most revealing fact is that emerging market investors want Greece to remain in the MSCI EM, maintaining overweight positions, while so far, no serious developed market investor has actively requested the addition of Greece to the DM indices. JP Morgan, in contrast to the dominant narrative within Greece, states the obvious. If the country finds itself in an index where it lacks size, depth, and weight, then the "upgrade" turns into a strategic mistake.
www.bankingnews.gr
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