The MSCI Greece index is the champion in returns this year with +35%, among all global stock markets, reports Morgan Stanley, in its analysis of the Greek economy. What it says, however, is that the data it examined show that the scope for further upside is significant.
“For Greece, we maintain the overweight recommendation, as it is the best performing equity market in the world this year and there is high scope for the continuation of its outperformance,” explains the bank.
Additional factors further supporting the outperformance of Greek equities and the MSCI Greece index are strong and resilient macroeconomics, achieving investment grade, the reduction in the cost of capital and the risk premium of Greek equities relative to Europe and developed markets.
Investment grade
In the analysis of the American investment bank, the dominant element is the investment grade. “A reduction in the Greek cost of capital (CoE) from 11.7% which is currently close to 9.4%, would mean a potential upside of +32%. This may be only a theoretical exercise, but it provides the size of a possible re-evaluation of Greek shares, in the short term”, explains the American house.
The bank’s economist supports the view that Greece will be able to reach investment-grade status from three agencies in the first half of next year, but there is a risk of an earlier upgrade if growth surprises and fiscal consolidation takes place at a faster pace than what the bank provides. An upgrade of Greece to investment grade in the coming months could support the current momentum in Greek stocks, as equity markets tend to start moving higher about eight months before the first rating.
Growth
On the macroeconomic side, the recovery of the Greek economy continues, with the chief economic analyst for Greece predicting that the domestic economy will continue to outperform the euro zone both this year and next.
Tight monetary policy is likely to weigh on the economy, but investment in Greece should continue to be supported by the implementation of the RRF program and record foreign direct investment inflows. On the political side, if New Democracy shows a result similar to that of the first round of parliamentary elections, it would mean it would win 180 seats in parliament and the possibility of forming a one-party majority government.
GDP growth for this year will be 2.5% and 2.2% in 2024. The macroeconomic course and the high performance of the MSCI Greece index have favored the positioning of foreign investors in Greek shares, which has increased in recent quarters. Passive fund managers investing in emerging markets, although with increased positions, are overall still slightly short on Greek equities.
Earnings dynamics
From there, the positive earnings momentum, especially for the banks, continues. The MSCI Greece index is the best performing market among emerging and developed markets, helped by positive revisions to earnings per share. Morgan Stanley sees further upgrades for 2023 and 2024, albeit at a slower pace. Greek stock valuations remain cheap in absolute and relative terms, with discounts remaining. The market is still trading at a deep discount to emerging markets and Europe. On a relative basis, MSCI Greece’s discounts against emerging markets and Europe remain high at -28% and -31% in terms of P/E valuation for the next 12 months.
Latest News
Intrum’s 2024 Report Unveils Greek Businesses Embrace Digitalization for Growth
Looking ahead, over 40% of businesses prioritize development for 2024, with 65% recognizing the potential of digital business models as sustainable investments
IOBE: Mild Drop in April Business Confidence Index (BCI) in Greece
The positive balance of expectations for employment witnessed a marginal decline, while the index for production forecasts also recorded a mild drop
Greek PM Mitsotakis Calls on EU to Intervene Over Multinationals’ Pricing Policy
Speaking about price fairness, the Prime Minister emphasized, "Europe should also mean similar or uniform prices for the products sold by our multinational corporations.
Greenhouse Gas Emissions: 4% Decrease in EU, 0.3% Rise in Greece in Q4 2023
The EU's GDP remained stable with a marginal 0.2% increase in fourth quarter of 2023
HEREMA CEO: High Expectations from Natgas Exploration Off Crete
3D seismic surveys were conducted in the two offshore blocks west and southwest of Crete by a consortium comprised of ExxonMobil and HelleniQ Energy
EC Spring Forecast: Greek GDP at 2.2 in 2024, 2.3% in 2025
Besides Greek GDP inflation is expected to drop by a substantial 2.4% in 2024, settling at 2.8% from 4.2% in 2023 with 2025 recording a further decline to 2.1%
EBRD Raises Outlook for Greek GDP to 2.3% in 2024, 2.6% in 2025
Key downside risks remain, associated with possible delays in deploying Recovery and Resilience Facility (RRF) funds and weaknesses in key export markets and tourism source countries
Real Estate Insights: Athens’ Top Areas with the Highest Yields
In the first quarter of 2024, Korydallos in the Piraeus region and the burgeoning Attiki Square retain their top spots with impressive yields of 6.3%
ELSTAT: Inflation at 3.1% in April
Olive oil (63.7%), fruit (11.6%), fish (10.6%), and mineral water (12.5%) registered the highest increases annually
Greek Sunlight CEO Joins Industry Titans at Choose France Summit
At the heart of the "Choose France Summit" was the discussion surrounding the production of lead-acid and lithium-ion batteries, crucial for the green transition and storage of renewable energy.