Banks and Greek businesses can expect capital inflows from abroad and from important investors, stronger foreign partnerships and lower borrowing costs. The Alpha Bank-Unicredit agreement appears to provide a first glimpse in this direction.
As reported by AMNA, in September Greece has been upgraded to investment grade with the upgrade from DBRS, but S&P made the first assessment of Greece in investment grade by the major rating agencies and it will be required, in large institutional portfolios, just one more upgrade from either Fitch or Moody's to make Greek government bonds eligible for some major investment grade bond indices from fund managers.
It is noted that the methodology of many bond indices requires at least two investment grade ratings from S&P, Fitch or Moody's. Goldman Sachs believes that Fitch's rating review on December 1 will be a major catalyst. The acquisition of investment grade by S&P paves the way for the integration of Greek bonds into all those indices, so that they are eligible securities from international funds. This will be finalized if on 1/12 Fitch's verdict also refers to the Greek economy receiving investment grade.
With the investment grade, Greek bonds also enter the radar of international investment funds that invest in bonds and managed about 28 trillion. US dollars in assets.
The investment tier will bring new inflows into Greek bonds, from the so-called index funds, which are estimated by BofA at 16 billion euros, according to its report at the beginning of the summer.
This is a significant amount, given that there are only €74 billion of Greek bonds in circulation, of which €35 billion are held by the ECB. BofA expects some spillover in inflows, depending on how quickly the big three upgrade their ratings. Therefore, these flows are expected more in 2024. Sources from the financial staff estimate that in the next period 6 to 7 billion euros could flow in.
The entry of Greek bonds into investment grade will also enable inclusion in widely used bond benchmarks, while allowing many other large institutional investors to invest in Greek bonds.
If today there are approximately 100 investment organizations working in Greece and investing in it, this number will approximately increase tenfold, according to an earlier statement by the head of the Bank of Greece. The direct net investments that came in 2022 to Greece were the highest in 20 years (since 2002), a trend that, as things show, continues this year as well. As the experience from abroad has shown, it shows that usually after foreign direct investments, portfolio investments by foreigners also follow.
The Athens Stock Exchange
Geopolitical concerns and the international environment do not allow the immediate upgrade of investment psychology, after the recovery of the investment grade and the deal of Alpha Bank with one of the leading European Banks.
According to the Managing Director of the Athens Stock Exchange Group, Giannos Kontopoulos, such an event cannot be fully priced if the required investment flows do not come, noting that at least two houses of one level and above should give the investment grade.
The investment grade "security" allows a much larger audience of investors to invest in Greek assets. This is due to the fact that in developed markets assets under management reach 52 trillion dollars, compared to only 6.3 trillion dollars. dollars in emerging markets.
Clearly the funds that will enter the market will do so gradually and not in one session. After all, there were many funds and investors who have already placed themselves in the market in the previous long period with significant profits. Some of them will want to get them.
Although the ATHEX developed market upgrade may come months after investment grade, market dynamics tend to pre-position, resulting in increased trading volumes and corporate actions. However, it is estimated that the upgrading of the Greek economy will also lead the Stock Exchange to the developed markets, towards the end of 2024.
It is estimated that in a few months after reaching investment grade, the houses will put the ATHEX on the "watch list for upgrading", which will be an important "signal" for strengthening the positions of investors in Greek shares.
