Greece Could Lose Developed Market Status By 2014: MSCI
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Greece’s equity market is “no longer in line with developed markets’ size requirements”, said index provider MSCI Inc on Thursday, with the country now set to face a review that may relegate the nation to emerging market status.
Greece’s equity market is “no longer in line with developed markets’ size requirements”, said index provider MSCI Inc on Thursday, with the country now set to face a review that may relegate the nation to emerging market status.
[quote]”The Greek equity market has experienced sharp declines, which are of course associated with the situation in Greece, the economic situation. The market has shrunk quite significantly,” said Dimitris Melas, MSCI’s executive director, as cited by Reuters.[/quote]Still any downgrade is unlikely to occur before 2014, Melas noted, as it normally takes MSCI 12 months to complete a review and another 12 months to implement any reclassification.
The news will come as another setback for the crisis-hit country, after it made the jump from emerging to developed market status back in 2001. Over the last five years however, the MSCI Greece Index has declined by 93 percent, which prompted a review from the index provider.
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According to MSCI, Greece will become the first-ever nation to have its developed market status revoked once the review is complete.
[quote]“MSCI is simply bowing to the inevitable. In a sense they really need a new category, blown-up developed markets,” “told Michael Shaoul, the New York-based chairman of Marketfield Asset Management, to Bloomberg Businessweek.[/quote]
Deutsche Bank head of emerging equity strategy John-Paul Smith though saw the MSCI move as simply a precautionary measure, arguing that only a euro exit would actually
trigger a downgrade for Greece.
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“Politically it will be difficult for any index providers to reclassify a market as EM if it is in the euro,” he said.
[quote]“The market may get followed and studied a bit more within the emerging universe. If Greece were to leave the euro and went back to having its own currency it could become a very interesting play,” Smith added.[/quote]MSCI is a New York-based index provider that tracks economic development, trading volumes and market accessibility to assess market classifications. MSCI presently has $7 trillion benchmarked against its indices globally.
