JP Morgan: How its view of Greek stocks has changed – Alpha Bank is in the top 10

JP Morgan has placed Alpha Bank’s share on the list of the top 10 shares of Central and Eastern Europe, Middle East and Africa (CEEMEA) region,  the first Greek share to enter the list since 2014, as highlighted in its new report bank.

It is also reported that Greece is JP Morgan‘s preferred market from the emerging markets of Europe for 2023, where it decided for the first time after five years to change its attitude to positive , mainly due to the growth “weapons” the Greek economy has.

Scenarios

As JP Morgan notes, with 2023 forecast to be a difficult year for the global economy and especially for the CEEMEA region, at least in the first half, Greece is showing a more predictable macroeconomic background, with increasing profitability in the banking sector.

The bank estimates that under its positive scenario the MSCI index of Greece will rise by 15% next year, while according to its basic scenario the rise will be around 8%.

The positive scenario for the index is supported by Greece being less impacted by high gas prices than in other EU countries, growth prospects for 2023 looking strong as EU funds flow in, clearing of banks’ balance sheets is largely complete and investors’ positions are still limited.

The dangers

Among risks is the small size of the Greek market, which makes it vulnerable, as well as the long-term growth dynamics.

For Alpha Bank

As for Alpha Bank, JP Morgan points out that its balance sheet cleanup is undervalued by emerging market investors and cheaper than most EU banks, while it has strong medium-term upside given the private sector with low leverage.

For the Greek market

As for the Greek stock market, the bank admits that it has not been involved much and adds that it was and still is a small part of the whole, weighing 2.1% in the MSCI EMEA index and 0.30% in the MSCI Emerging Markets. It reviewed its last extensive report on Greece which was in 2017.

“We considered it a high-risk market where we didn’t have a strong view. Now, we have some stronger views: the process of repairing the banks’ balance sheets has been successfully completed, finally, and the macroeconomic background is both positive and more resilient to the European recession than most countries in the Central European region,” it says.

The recovery is clear

In macroeconomic terms, in the 2010s per capita income in Greece had fallen by 28% (from its peak in 2007 in real terms to its 2020 low in the COVID-19 period) and is still 18% lower.

But Greece’s recovery path, as JP Morgan points out, looks clearer and more certain with the Recovery Fund in the background. In addition, Greece-EU relations have improved significantly under the New Democracy government after the 2019 elections. Greece has managed to secure a good share of the EU (NGEU) funds that will help the next leg of development.

“We agree with the IMF’s assessment that the reforms supported and financed by the NGEU are vital to pushing structural growth higher,” JP Morgan notes. The government’s recovery and resilience plan has already disbursed €1.8 billion (about 1% of GDP) with another €8 billion in projects in earlier stages. In total, the government plans to spend 32 billion euros in 2021-2026″, it is reported.

Finally, JP Morgan sees opportunities for Greek banks in the low corporate debt of the non-financial sector and in household debt.