ECONOMY

No downgrade risk, bourse VP says

The Athens Stock Exchange is not at risk of losing its developed-market status, despite being put on watch for a downgrade by a leading global index compiler, the vice chairman of Hellenic Exchanges said yesterday. On Tuesday, stock index compiler FTSE added Greece to its watch list for a possible demotion to «advanced emerging» from «developed» market as part of a review, a move that could lead to an exodus of index funds that track mature markets. But the senior Athens bourse official said he was confident talks with FTSE representatives next month and the adoption of a European Union investment services directive will convince the index compiler to remove the warning. «I don’t see any risk of a downgrade,» Socrates Lazaridis, vice chairman and general manager of Hellenic Exchanges, told Reuters in an interview. «We are confident our points will be understood and we will be taken off the watch list as some of the criteria will have been addressed by then.» Countries stay on a watch list for at least 12 months before any change is made to their status. FTSE’s indices are used by investors worldwide for analysis, performance measurement and asset allocation. The ASE, which gained developed-market status after Greece joined the eurozone in 2001, was placed on watch for failing to get a «pass» on six criteria, which is the minimum required for a warning. Four of these pre-existed. Lazaridis said the Athens bourse disagrees with the grade it was given on two criteria – the level of liquidity of the bourse’s equity derivatives market and stock lending procedures. Lazaridis said FTSE’s assessment that volumes in the derivatives market were inadequate for a developed market were incorrect. He said turnover had grown 31 percent so far this year, recovering from a 13.5 percent drop in 2005. «How can there be an issue when the specific criterion got a ‘pass’ in last year’s review, when volumes were lower, and this year with turnover up it gets a ‘restricted’ grade?» he said. In FTSE language, «restricted» means borderline unacceptable. Lazaridis said the second assessment, FTSE’s view that stock lending in the Greek equities market was too cumbersome for a developed market, was also not fair. «If one looks at statistics, stock lending is up 134 percent year-on-year. Since nothing has changed procedurally in the last three years, how can this have become burdensome with volumes up markedly?» Athens bourse authorities will meet FTSE officials on October 12 to explain these points. Stock lending takes place via so-called stock repo and reverse stock repo contracts traded in the bourse’s derivatives market, instruments used by traders who wish to sell short. Lazaridis said another two criteria will be resolved in time for FTSE’s next review, by the adoption of MIFID, a European Union directive on investment services, by next March. These criteria concern off-exchange transactions, the buying and selling of stocks outside a regulated market, and free delivery of shares. Trading volume on the Athens Stock Exchange is up 45 percent year-on-year with foreign portfolios accounting for about 47 percent of turnover in the constituent stocks of the bourse’s blue chip index FTSE/ASE 20. «The sustained interest of foreign investors confirms that the capital market’s continuous efforts to modernize are in the right direction,» he said.