Greek shares will face capital outflows as MSCI Inc.’s upgrade of Greece to developed-market status forces funds tracking emerging-market indices to sell, according to strategists at JPMorgan Chase & Co.
The change, which is expected to take effect in May, will lead to $5.1 billion in sales by funds benchmarked against emerging-market indices, a team led by Pankaj Gupta wrote in a note.
Funds tracking developed-market indices are expected to make $4.8 billion in purchases, leaving estimated net outflows of about $275 million.
“We estimate that the overall impact on passive flows into Greece will be negative,” Gupta said.
MSCI upgraded Greek shares in March, marking a milestone in the country’s recovery from the debt crisis, which at the time posed a significant threat to the eurozone economy.
The Athens Stock Exchange General Index has outperformed since the start of the decade, posting a total return of 246%, including reinvested dividends, compared with 94% for the Stoxx Europe 600.
Even so, unlike most European benchmarks, which have reached record highs this year, the Athens Stock Exchange index remains well below its 2007 peak, before the global financial crisis.
The upgrade will give Greek shares a significantly smaller weighting in the new benchmarks, according to JPMorgan strategists.
Greece’s weighting in the MSCI World index is estimated at 0.06%, compared with its current weighting of 0.61% in the MSCI EM Standard index, Gupta said. Of the 10 Greek shares included in the emerging-markets index, seven are expected to move to the developed-markets index, according to the firm.
Greece’s weighting is estimated at 0.41% in the MSCI Europe index and 0.27% in the MSCI EAFE index.