Athens Stock Exchange: On track to upgrade after investment grade

With any profit-taking moves offset by demand, as buying interest from foreign capital also remains strong, the Athens Stock Exchange is moving to nine-year highs, with YTD gains for Greek stocks now hovering around 20 billion euros and the General Index to be at the top of the world’s returns, recording a 35% increase this year.

The deals

At the same time, the rumored business deals, the strong upward trend in corporate earnings, the upcoming flagship introduction of the “E. Venizelos” on the AX which could strengthen the overall footprint of the Greek capital market, but also the introduction of Optima Bank and some real estate management companies and above all the expected recovery of the investment grade after the second elections and the possible achievement of self-reliance by the ND (which it is estimated that it will bring closer the investment grade) maintain the positive investment climate.

The ratings

JP Morgan, which expects that DBRS on September 8, S&P on October 20 and Fitch on December 1 will give the country the status of investment grade, has even planned for the beginning of July the landing of its executives in Athens for meetings with officials and listed .

ATHEX upgrade

At the same time, subject to the recovery of the investment grade, the Greek Stock Exchange is preparing to achieve its own upgrade in the developed markets in the medium term, through the fulfillment of some criteria concerning the number of listed companies with high capitalization and the required dispersion, the orderly operation of the derivatives market, etc., although a lot will be judged by the answers of the “strong players” of the markets, some leading fund management companies, such as e.g. Capital and Fidelity, regarding where they themselves position the Greek capital market.

The final upgrade is expected probably until 2025, since a period of more than a year will be required until the announcement of the possible change of status, while then the AXA will have to remain under evaluation in an intermediate category for 12 months. The markets, of course, as they discount the events, will move earlier and with the recovery of the investment grade as a milestone, some funds are expected to take (if they are not already taking) positions in Greek assets faster.

Positions in falling prices

At a time when the ECB is expected to increase interest rates next Thursday by 0.25%, the fact that the spread of the Greek 10-year bonds narrowed in relation to the German one in the region of 125 basis points compared to just 30 basis points for the Spanish, but also with Greece’s borrowing costs 55 basis points cheaper than Italy’s, it shows that markets are already pricing in investment grade for Greece. In this context, JP Morgan no longer considers it an attractive option to recommend an “increased position” (overweight) in Greek bonds at current price levels, adopting the strategy of placements in periods of widening spreads and especially in securities with a duration of 8 to 10 years.