JP Morgan has upgraded its recommendation for the Greek stock market to "overweight" from "neutral," estimating inflows of approximately 1 billion dollars from the inclusion of Greek stocks in the Euro STOXX 600 index. This move comes as a complete reversal of the more cautious tone it had previously adopted regarding the Greek market, particularly concerning the pace and sustainability of the Athens Stock Exchange upgrade into international investment categories.
From skepticism to "overweight"
In previous reports, JP Morgan had appeared more hesitant regarding the speed of Greece's entry into major European indices, pointing out structural market weaknesses, limited liquidity, and depth issues. Today, however, the firm adopts a more aggressive stance, recognizing that upcoming portfolio rebalancing can bring strong passive inflows, regardless of the fundamental reservations it had expressed in the past.
Euro STOXX and inflows into the Greek market
The inclusion of Greece in the Euro STOXX 600, with an eye toward the September 18 rebalancing, is estimated to act as a mechanism for mandatory allocations by international portfolios. In other words, the upgrade is not solely attributed to a qualitative recognition of the market, but also to technical capital flows generated by index rules.
Greece from crisis to "normalization"
The Greek economy has recovered significantly since the debt crisis that began in 2009, making progress in loan repayments and reducing public debt faster than expected. Concurrently, the MSCI index provider has signaled a potential upgrade of Greece to developed market status in 2027, a development that strengthens the "return to normalcy" narrative for Greek equities.
Banks at the center of the flows
Greek banks play a decisive role in the investment landscape, having returned to private ownership and dividend distribution following the recapitalization period. Eurobank, National Bank, Piraeus, and Alpha Bank are expected to be at the epicenter of passive inflows due to their potential inclusion in the Euro STOXX.
Valuations
Despite the strong rally of recent years, JP Morgan notes that the Greek market continues to trade at a discount compared to emerging markets, with a valuation multiple of approximately 10.8 times forward earnings. This fact leaves room for further re-rating, but at the same time highlights that the investment story still relies heavily on situational factors and not exclusively on a fundamental upgrade.
Political stability as the market's backdrop
On a political level, Kyriakos Mitsotakis and the New Democracy party are viewed by the firm as the most likely scenario for maintaining a stable political environment. This assessment supports the investment narrative without, however, undoing the market's dependence on external capital flows.
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