ECONOMY

Greek stocks rise on first day of EM trade

Greek stocks made their trading debut on MSCI’s emerging equity index on Wednesday after a 12-year gap, rising 1 percent on the back of European gains, though broader emerging stocks were subdued after mixed U.S. data signals.

Earlier in Asia too the picture was mixed, with Chinese shares rallying but the Indonesian and Thai currencies extending losses, the latter hit by political turmoil and an unexpected interest rate cut.

Athens’ stocks added to this year’s gains of almost 30 percent that have been fuelled by hopes that relegation to the emerging index would bring in more inflows from index-tracking funds and other dedicated investors.

While Greece had carried a tiny 0.02 percent weight in MSCI’s developed index, it will have a larger 0.4 percent share in the emerging markets index and almost 4 percent in the emerging European index

The banks joining the index, the National Bank of Greece, Piraeus Bank and Alpha Bank, however fell 2-3 percent, bucking strong gains in some other new entrants such as consumer goods firm Folli Folli, lottery firm OPAP and telecom company OTE.

“It’s exciting to have Greece back in the fold,» said John Lomax, head of emerging equity strategy at HSBC, adding that he had a triple overweight on Greek stocks.

Lomax attributed Wednesday’s big stock moves in Athens to technical shifts associated with joining the emerging index but said he expected more gains, underpinned by economic recovery and the euro zone.

Broader European stocks rose after positive political developments in Germany and Italy, lifting most markets in central and eastern Europe.

“European financial stability is an interesting story to play in the emerging space. You can play this via central Europe or Greece and if you look at Greek valuations, they still look cheap,» he added.

Analysts reckon the stocks will get at least $500 million from passive funds.

“Passive money must wait until the day of entry (to buy) and this implies that this is still ahead,» said Charlie Gushee, managing director at brokerage Auerbach Grayson.

Also within MSCI indices, Morocco moved down a notch into the frontier markets space and out of the emerging index. Moroccan stocks rose 0.7 percent to a 2-1/2 week high, but are flat on the year.

Gushee said while relegation to a lower equity league was positive for Greece, the outlook was less bright for Morocco.

“If you are an EM fund manager benchmarked to the MSCI emerging index, you will be a forced seller of Morocco,» he said. «But if you are a frontier fund manager you are less likely to have that benchmark in place, so you wont be a forced buyer.”

Elsewhere, emerging equity moves were lacklustre, with the main index gaining 0.3 percent, lifted by gains of almost 1 percent in China. A strong U.S. housing report on Tuesday again ignited speculation that the U.S. Federal Reserve could start reducing bond-buying before March.

The Thai baht fell up to 0.5 percent to the dollar after the central bank unexpectedly cut interest rates, saying political tension was hurting investor confidence.

The currency has slid 3.3 percent this month as protests have spread and the economy has lost steam. Thai 5-year credit default swaps rose 5 basis points to 129 bps, a two-month high.

The Indonesian rupiah slumped again to the lowest in almost five years, forcing the central bank to sell dollars

Ukraine’s dollar bond due 2023 fell 0.75 point ahead of a European Union summit on Thursday. Ukrainian president Viktor Yanukovich confirmed on Tuesday he would attend the summit, despite last week shelving plans to sign a landmark pact with the EU.

[Reuters]