S.O.S. ~| Unprecedented Decision-Milestone |~ (!) According to MSCI, Greece became the first developed nation to cut to emerging markets (!)


According to MSCI Inc. official conclusion and its related announcement, Greece became the first developed nation and market to cut to emerging market after the country’s stocks plunged 91 percent since 2007. Therefore, from now on Greece and Greek market (Athens Stock Exchange-ASE) will be one of the emerging markets of MSCI Emerging Markets (EM) Index, instead of one of the developed markets of MSCI Developed Markets (DM) Index, as it failed to meet criteria regarding securities borrowing and lending facilities, short selling and transferability. Particularly, MSCI DM Index currently (from June 2013 onwards till the next classification of MSCI on June 2014) consists of 23 countries, the following (classified by wider regions in the world):

Americas: United States of America and Canada.

Europe, and Middle East: Germany, France, United Kingdom, Italy, Spain, The Netherlands, Belgium, Switzerland, Sweden, Norway, Denmark, Austria, Finland, Ireland, Portugal and Israel.

Asia and Oceania: Japan, Australia, Hong Kong, Singapore and New Zealand.

Furthermore, MSCI Emerging Markets (EM) Index currently (from June 2013 onwards) covers 21 countries, the following:

Americas: Brazil, Mexico, Colombia, Peru and Chile.

Europe, Middle East and Africa: Russia, Poland, Greece, Czech Republic, Hungary, Turkey, Egypt and South Africa.

Asia: China, India, Indonesia, South Korea, Taiwan, Malaysia, Thailand and Philippines.

Finally, MSCI Frontier Markets (FM) Index currently (from June 2013 onwards) covers 34 countries, the following:

Americas: Argentina, Jamaica and Trinidad & Tobacco.

Europe and CIS: Ukraine, Romania, Serbia, Bulgaria, Croatia, Slovenia, Bosnia Herzegovina, Lithuania, Estonia and Kazakhstan.

Africa: Nigeria, Morocco, Tunisia, Kenya, Ghana, Zimbabwe, Botswana and Mauritius.

Middle East: Saudi Arabia, Jordan, Lebanon, Oman, Kuwait, Bahrain, Qatar, United Arab Emirates and Palestine.

Asia: Pakistan, Bangladesh, Vietnam and  Sri Lanka.

It is worth taking into account that Greece as a no longer developed country does not have the general characteristics of a developed even an emerging country, although it is officially now categorized as an emerging country of MSCI EM Index. Especially, on the one hand the overwhelming majority of the corresponding emerging countries of MSCI EM Index have high GDP growth rates and significant perspectives for further growth in the future. On the other hand, Greece’s GDP continues to contract and within the last 6 consecutive years has absolutely collapsed (total decrease of more than 25% by the end of 2013, while there are several internationally recognized organizations, institutions and bodies that predict 2014 will be the 7th consecutive year of Greek GDP’s shrinkage).

Greek Market [Key Facts]

Market Size (Population 2011): 10.8 million (Source: Official Census Results by ELSTAT).

Nominal GDP (2012): ≈$249 billion (Source: IMF)

Market Capitalization (ASE): ≈$85 billion (end of May 2013)

ASE Cap/GDP: ≈ 34%

Apart from the above, it is significant to mention that the average percentage Capital Market Capitalization/GDP in the European markets fluctuates between 65% and 70%.

Furthermore, the imploding Greek economy that is characterized by a very small and unstable capital market (ASE capitalization), an unprecedented and deep recession, an uncontrolled unemployment rate and a collapsing demographic potential; has more differences than similarities with various emerging countries like Brazil, Russian Federation, India, China, South Africa (BRICS), Turkey or Egypt that are countries with a strong GDP growth and demographic potential. In a nutshell, Greek economy and Greek demographic potential have been totally destroyed as a result of the really tough austerity measures. It is commonly conceivable that the future progress of the Greek real economy as well as the Greek capital market will be very difficult and undoubtedly unpredictable…

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The following tables depict the classification of countries globally at the corresponding MSCI Index in Developed, Emerging and Frontier Markets before the last MSCI evaluation this June (i.e. the classification from June 2013 onwards). Officially, as of November 2013, Greece will be classified in Emerging Markets from Developed Markets.

Devoloped Markets                                           Emerging Markets

1LMS_1276-10_210x210_All-Country-World-graphic_EM_rectangle

Frontier Markets

LMS_1276-10_310x297_All-Country-World-graphic_FM_rectangle

Note: MSCI regularly reviews (from 1987) the market classification of all countries included (or under consideration for inclusion) in its global equity universe based on extensive discussions with the investment community (as a total 78 countries). Using the MSCI Market Classification Framework, MSCI examines each country’s economic development, size, liquidity and market accessibility in order to be classified in a given investment universe. Each June every year, MSCI communicates its conclusions on the list of countries under review and announces the new list of countries, if any, under review for potential market reclassification in the upcoming cycle.

                                                                                                                                                                                                

Written by Christos Ghikas

About Christos Ghikas

Financial Analyst/Investment Consultant. Strongly interested in Capital/Financial Markets, RES/Energy Project Portfolio Management, Investment and Population Analysis (Economics/Demographics). Ι state that it is better to fight for something than live for nothing. Therefore, life to me is a perpetual fight... Personal Web Profile: http://about.me/ghikaschristos, Personal E-mail: c.ghikas@gmail.com

Posted on June 16, 2013, in Capital Markets Analysis and tagged , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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