Effective Nov. 30, Greece will be re-classified
as an emerging market by MSCI Inc. This is the first time MSCI has dropped a
country from its developed market index classification. This follows Russell
Investments, which demoted Greece to emerging market status within its indexes in
March, with an effective date of June 28th.
The MSCI Greece Index failed to qualify on
several market accessibility criteria. The minimum standards that currently
prevail in developed markets reflect continuous market improvements introduced
by authorities in other countries over the years. However, very few of these
improved market practices have been reflected in the Greek market. This has led
to Greece now failing to meet on multiple criteria: securities borrowing and
lending facilities, short selling and transferability.
The current environment for in‐kind
transfer and off‐exchange transaction‐like facilities that were introduced in
2008 by the Greek authorities and the Athens Stock Exchange, are so restrictive
that they have become essentially unusable. Additionally, the long standing
absence of well‐established stock lending as well as short selling practices
also make the Greek equity market incompatible with the standards of other
developed equity markets. Further, the MSCI Greece Index has not met the
Developed Market criterion for size for the last two years.
Greece accounts for only 0.01% of the MSCI World
index and is the smallest developed market in terms of market value and number
of stocks among the constituent countries. And it accounts for 0.02% of the
MSCI Europe Australasia Far East index. The MSCI Greece index has only two
stocks, Hellenic Telecommunications Organization SA, known as OTE, and Greek
Organization of Football Prognostics SA, known as Opap, a company that manages
lotteries and sports betting. Greece would account for 0.3% of the MSCI
emerging markets index weighting. Once moved to emerging markets, more Greek
companies might be included because there is a lower eligibility threshold.
For consideration to regain its developed market
status, Greece would have to have at least five eligible companies of $2
billion in market value each, among other criteria. Greece had been re-classified
to the developed markets category from emerging markets in 2001.