Greek Stocks Gaining Investor Interest

By Johann M Cherian

(Reuters) – Greek stocks are rapidly gaining favor among investors, with expectations for an upgrade to developed-market status next year due to a strong economy and robust bank performance.

The Athens General Stocks Index has risen 13.1% so far in 2024, following a near 40% jump last year, outperforming the Europe-wide STOXX 600's 7.7% gain this year.

Amundi's Greek equities fund attracted net inflows of $2.9 million in November, its highest in a year, as reported by Morningstar.

Wim-Hein Pals, head of emerging markets equity at Robeco (managing over 10 billion euros), noted that Greece's economy is growing rapidly compared to the euro zone average, enhancing earnings growth potential for Greek companies.

Greece has been recovering steadily from a 2009 debt crisis that nearly led to its exit from the euro. Borrowing costs have decreased below those of Italy and France, and banks that required bailouts are now fully privatized.

Analysts predict further momentum in Greek stocks as they currently trade at a discount to the STOXX 600 and offer higher dividend yields relative to the broader European market.

The European Commission anticipates a 2.3% economic growth for Greece in 2025, compared to 1.3% for the euro zone.

Financial stocks, making up 30% of the main Greek index, have surged over 20% this year, driven by strong domestic and foreign demand as the government completes bank privatizations. The four largest banks have resumed dividend payments for the first time in 16 years.

The government's fiscal situation has improved, repaying bailout loans, and debt is projected to reduce to 146.8% of GDP next year from over 200% during the pandemic. Bank of America forecasts this ratio falling below Italy's by 2028.

Despite potential trade tariffs due to the incoming U.S. administration, the U.S. maintains a trade surplus with Greece, likely mitigating impacts. Nassos Koumettis from Hellenic Asset Management believes Greek companies are relatively insulated against trade conflicts, as most exports to the U.S. consist of less tariff-sensitive services.

Post-U.S. election, Robeco increased its investment in Greek stocks, especially in the financial sector.

Greece's improving economic metrics place its equities on the verge of regaining developed-market status, with FTSE Russell listing it on an upgrade watchlist in October.

Athanasios Vamvakidis of BofA Global Research noted that while Greece meets many criteria for developed status, it requires a consistent positive fiscal track record.

Most fund managers rely on MSCI's classifications, which still consider Greece an emerging market due to a downgrade in 2013. MSCI continues to evaluate reforms aimed at improving market accessibility.

($1 = 0.9523 euros)