JP Morgan upgraded its investment recommendation for Greece to "overweight" from "neutral", citing significant inflows expected to result from the inclusion of Greek stocks in the European Euro STOXX index later this year.
According to the American investment house, the index restructuring on September 18 is estimated to lead to the entry of Greek securities into the Euro STOXX, creating passive and active capital inflows estimated at around $1 billion. At the same time, JP Morgan also upgraded its overall stance on the markets of Central and Eastern Europe, the Middle East, and Africa (CEEMEA).
JP Morgan estimates that Greece is in a unique position, as for about eight months it will remain in the MSCI Emerging Markets index, while at the same time participating in a leading European index. This, according to the firm, creates the potential to attract capital both from investors positioned in emerging markets and from portfolios following developed European markets.
The firm estimates that the four major Greek banks will be included in the Euro STOXX - Eurobank, National Bank, Piraeus Bank, and Alpha Bank - which have left behind the recapitalization period, have fully returned to private hands, and have resumed dividend distribution.
The report also highlights that the Greek economy has regained a significant part of its credibility after the debt crisis, with the early repayment of bailout loans and the ongoing reduction of public debt. In the same vein, it recalls the recent announcement by MSCI that it plans to reclassify Greece to developed markets in 2027, a development that constitutes yet another recognition of the country's economic and financial recovery.
Despite the significant rise of the Greek stock market, which has more than tripled in value since 2021 and recorded last year its best annual performance since 2019, JP Morgan notes that Greek stocks continue to trade at a discount compared to other emerging markets. Specifically, they trade at a P/E ratio of 10.8 times estimated earnings for the next 12 months, compared to 11.3 times for the average of emerging markets.
Finally, JP Morgan points out that the political environment remains supportive for the markets, as it considers that New Democracy continues to be the favorite to prevail in the next elections, ensuring the continuation of a stable economic policy.