MSCI EM means $3 bln for Greek stocks

Greece's leading companies are set for a multi-billion-dollar boost in stock market value as a result of their inclusion in MSCI's flagship emerging market index, improving their appeal to investors as they struggle in a deep recession.
Ten Greek companies will enter MSCI's Emerging Markets index on November 27, with the Athens Stock Exchange already surging in heavy volume as international investors took a fresh look at a country whose debt crisis hammered asset values.
MSCI, which has $7 trln benchmarked against its indices, said National Bank of Greece, Piraeus Bank and Alpha Bank would be the biggest entrants.
Greece has been relegated from the top, ‘developed’ market index in what might seem like a major setback. But analysts reckon Greece will benefit hugely from the reclassification, which follows similar action from index providers Russell Indexes and Standard & Poor's. FTSE may also follow suit.
Ludovic Moreau, global head of portfolio trading strategies at Citi, estimates passive, index-tracking funds will pump $500 mln into the affected companies, while an additional $350 mln could come from semi-passive funds that are allowed to track the index with more magnitude.
He said Greece's tiny 0.02% weighting in the MSCI Developed index had been a huge disadvantage as it allowed many investors to ditch it altogether from their portfolios.
With Greece's share of the emerging index set to total 0.4% and nearly 4% of MSCI's Emerging Europe index, that is set to change.
Money coming in from investors may represent as many as three to four times the passive volumes, Moreau said, adding: "We estimate around $2-3 bln of exposure that could come from active fund managers."
Renaissance Capital predicted inflows of $520 mln from exchange-traded funds.
"The effect of MSCI EM Index inclusion is more positive for the smaller names currently not included in the MSCI Developed Greece Index, which will become part of the MSCI Emerging Greece Index," Renaissance said.
The other Greek additions to MSCI's EM index are consumer goods firm Folli Follie, Hellenic Petroleum, retailer Jumbo, lottery firm OPAP, telco OTE, utility Public Power Corp/DEH and Titan Cement.
If the new flows materialise, the potential impact is huge. Citi calculates, for instance, that just passive and semi-passive flows would amount to between 10 and 30 times the average daily trading volume on some of the companies.
Some of those expectations are reflected already in recent moves in the Greek bourse, which is up 30% in 2013, outpacing regional peers, on tentative signs of recovery.
Active money has shifted into the bourse ahead of the index shuffle, helping send October volumes on the Athens exchange to their highest since June 2012.
A subset of 11 companies that were expected to enter the emerging markets index has risen more than 50% in absolute dollar terms since the first announcement of Greece's demotion on June 11 this year, Deutsche Bank said.
“MSCI said that three largest pro forma constituents of the MSCI Greece Index are OPAP (weight of 18.01%), OTE (weight of 17.95%), and NBG (weight of 11.01%). As far as other Greek indices are concerned, there will be one addition to and nine deletions from the MSCI Greece Small Cap Index, bringing the number of constituents to eleven. Accordingly, the MSCI Greece Small CapIndex will have a pro forma weight of 0.78% in the MSCI Emerging Markets Small Cap Index,” explained Konstantinos Manolopoulos, analyst at the Investment Bank of Greece.