Multiple benefits both from the point of view of the real economy and for Greek stocks and bonds arise from achieving investment grade, including reduced borrowing costs, capital inflows and improved liquidity.

In terms of the capital market, the investment tier will lead to a large expansion of the investment base for Greek bonds and stocks, while attracting new high-quality long-term investors who were previously unable to invest in Greece.

Perhaps the most obvious benefit of Greece’s recovery to investment grade will be a further fall in bond yields, thereby reducing borrowing costs and improving liquidity conditions for the state, banks and Greek businesses. Part of the benefit has already been priced in, with ten-year Greek bond yields down over 70bps. this year and lower than the corresponding Italian versions.

It is noted that pending such an upgrade, according to Bloomberg, foreign investors have poured €3.4 billion into Greek stocks and bonds this year, propelling the two markets to the world’s top performers. Also the return to the club investment grade (IG) and the continued implementation of reforms could justify a further reduction in country risk, resulting in further revaluation of Greek assets. This, together with the increased appetite for new corporate bond issues, new IPOs and the planned disinvestment of the HFSF by Greek banks, should lead to a significant increase in trading volumes and attract new flows.

For the banks, according to the National Stock Exchange the upgrade to IG would translate into improved funding conditions, interest cost savings on future MREL (Equity Requirement and Eligible Liabilities) issues of approximately 8 billion (i.e. 80 million combined annually for a drop 100 basis points in the cost of funding) and improving the quality of their securities portfolios, which mainly consist of Greek bond securities. In addition, IG should trigger an increase in private investment that will give an additional boost to GDP (up to 0.5 points in 2024).

The investment grade status is the one that will give a big boost to Greece and also to the Athens Stock Exchange, as Axia Ventures emphasizes, given the positive effects it will have on the economy and on Greek assets. A return to investment grade (IG) will allow Greek stocks and bonds to return to the radar of more investors. Essentially, these investors were unable to allocate capital to Greece after its downgrade to emerging markets, due to restrictions on their charter.

In addition, 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.

The stock market has seen a big move up from October 2022 and around 850 points to 1350 points in July 2023. Much of this move is due to the discounting of the investment grade recovery.

In the last five months, foreign investors have recorded outflows of 535 million euros. The withdrawal of some foreign investors has to a significant extent to do with the expected upgrade of the Greek economy to investment grade and the portfolios that invest in emerging markets are gradually withdrawn from the A.E. At the same time, many funds cannot invest, not because they don’t want to, but because they face the technical obstacle of sub-investment grade. They have to wait for the event. Funds that invest in countries with investment grade, based on their statutes, should wait for one, maybe even two officially recognized Houses, to include Greece in the investment grade.

The report of the American investment bank JP Morgan is typical, that American investors have relatively little exposure to the A.X., and are looking for opportunities to enter Greek shares, in view of both the acquisition and the investment grade of the Greek economy.

Return of the A.A. to the developed markets

At the same time, 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 the investment grade, the houses will put the AX on the “watch list for upgrading”, which will be an important “signal” for strengthening the positions of investors in Greek shares.

The return of A.A. in the developed markets is a bet of great importance for the Greek stock market, which, due to the great economic crisis and the downgrading of the country’s debt, lost its position in the indices of the developed markets, with the result that since then the Greek market only draws funds from the small “pool” of investment portfolios and hedge funds placed in emerging markets, which negatively affects trading activity and stock valuations.

The emerging markets, in which the ASE is “trapped”, are a very small part of the global investment “pie” and attract correspondingly small funds. For example, in MSCI’s global index the weighting of emerging markets is only 13%.