FTSE, the British provider of stock market indices that the Athens Exchange cooperates with, has announced the prospective downgrade of the Greek bourse from “developed market” to “advanced emerging market.”
The downgrade is attributed to the imposition of capital controls on Greek investors, as well as the long, five-week period that the Greek stock market remained closed in the summer, from late June to early August, and the continued economic instability in Greece. “These are not characteristics associated with a steady developed market,” FTSE commented.
The particularly low capitalization of the market has not helped either, as this was reportedly the main issue of discussions between FTSE and Athens Exchange representatives last Friday.
The Athens bourse will be downgraded in March 2016, in conjunction with the semi-annual review of the FTSE Global Equity Index Series (GEIS). The last time the Greek exchange held the status of advanced emerging market was back in 2001.
This development is likely to lead to capital restructuring in the local market, as well as portfolio transfers and investor departures, to a greater extent than today. It is also certain new capital coming from funds that opt to invest in emerging markets will make its presence felt, as will the departure of any major investors left holding Greek chips.