FTSE puts bourse on watch for possible downgrade to ‘advanced emerging’ market

Global stock index compiler FTSE yesterday added Greece to its watch list for a possible downgrade as part of an annual country classification review, but the Athens Stock Exchange challenged the evaluation. FTSE, whose indices are used by investors worldwide for analysis, performance measurement and asset allocation, said Greece was placed on its watch list for a possible demotion to «advanced emerging» from «developed» market. «Countries remain on the watch list for a minimum of 12 months before any change is made to their status,» FTSE said. A downgrade could have repercussions, leading to the exodus of index funds that track mature markets. The Athens Stock Exchange said it disagreed with two criteria which affected FTSE’s review – the levels of liquidity of the bourse’s equity derivatives market and stock-lending procedures. The exchange challenged FTSE’s assessment that volumes in the derivatives market were inadequate for a developed market, saying turnover has grown 30 percent in the last 12 months. It also said FTSE’s view that stock lending in the Greek equities market was too cumbersome for developed market status was unfair. Athens bourse authorities will hold talks with FTSE officials next month. Brokers said a demotion was unlikely as the key areas would be addressed. The move by FTSE did not create any market jitters. Greek stocks ended flat. «We have enough time to fix things; I don’t think authorities will allow it to develop into a downgrade. Being on the watch list gives the bourse enough time to react, it’s not the first time,» said broker Nick Diamantopoulos at Kappa Securities. Based on FTSE’s review, South Korea and Taiwan were placed on watch for a possible promotion to «developed» from «advanced emerging.» Poland and Hungary as well for a possible promotion to «advanced emerging» from «emerging.» (Reuters)