Among Morgan Stanley’s top picks for the EEMEA (Emerging Europe, Middle East, and Africa), with the U.S. firm upgrading the country’s ranking and placing particular emphasis on Greek banks.
In the new report “Country Scorecard Refresh - Hungary & Greece Move Up,” Morgan Stanley ranks Greece 4th among EEMEA markets, up from 5th previously, surpassing South Africa and maintaining an overweight recommendation. Only Egypt, Poland, and Hungary rank higher.
The “bet” on de-escalation in the Middle East
A key factor in Greece’s improved ranking is the new thematic assessment introduced by Morgan Stanley, the so-called “Middle East de-escalation” index.
Although the firm emphasizes that precise timing is difficult to predict, it estimates that the Strait of Hormuz is likely to begin reopening in the coming months as part of a potential MoU-style agreement between the U.S. and Iran. In such a scenario, high-beta markets, such as Greece, Poland, Hungary, and South Africa, are expected to outperform, while Gulf markets outside the UAE may lag.
Morgan Stanley notes that Greece’s rise in the rankings is due both to improvements in momentum indicators (idiosyncratic and earnings-related) and to the positive impact of this new thematic factor.
Greek banks return to the spotlight
The strongest signal for the Greek stock market comes from Morgan Stanley’s flagship “Top 40 Combined Stock Screen,” the list of stocks with the highest scores based on valuation, profitability, quality, momentum, and thematic factors.
The new additions to the list include two Greek banks:
along with names such as OTP Bank, Pekao, and Bank Millennium.
It should be noted that the overweight recommendation applies to the overall market (country) and not to individual bank stocks; Piraeus, National, and Alpha Bank are not covered by individual recommendations from Morgan Stanley. Their presence on the screens is based on the quantitative scores of the model’s factors.
Piraeus stands out, appearing both on the list of stocks expected to outperform in a Middle East de-escalation scenario and ranking high on the Earnings Revision Rate (ERR) index, where it ranks 3rd in the EEMEA region.
Conversely, PPC has been removed from Morgan Stanley’s Top 40 Screen, while simultaneously appearing among the new additions to the Bottom 40 Screen—that is, the list of stocks with the lowest overall scores.
Greece Among the Region’s Top Markets
Although earnings revisions for the Greek market remain relatively weak compared to other EEMEA markets, the overall picture continues to improve thanks to stock momentum, fundamentals, and the country’s positive exposure to a scenario of de-escalation of geopolitical tensions in the Middle East.