15 September 2014
S&P Dow Jones Indices has demoted the country to emerging market status.
The downgrade from S&P follows MSCI which lowered Greece's rating last year, 12 years after its promotion from the category. Photo: EPA
Greece has been downgraded to an emerging market by S&P Dow Jones Indices, in a blow for the country which was badly hit during the financial crisis.
The Greek market was assigned a weighting of 0.8pc by S&P Dow Jones Indices making it a relative minnow in the emerging market index compared to China which constitutes about a quarter (24pc) of the measure and Brazil and India which make up 11.3pc and 10pc respectively
The shift could mean that pension funds and more cautious investors will have to move out of the Athens stock index. Greek stocks opened yesterday down 0.4pc to 1,156 on the Athens stock exchange and the bond yield on Greek debt increased, meaning that investors view it as a riskier prospect.
The downgrade comes as Greek government officials held talks in Paris at the start of the month to demonstrate that its austerity measures are on track. The talks were organised ahead of a full sixth review of Greece’s austerity programme to be held by troika officials in Athens at the end of this month.
The Greek economy has to fix its finances under the terms of two bailouts worth a combined €240bn.
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The “troika” of the International Monetary Fund (IMF), European Commission and European Central that bailed out the Greek economy are waiting for further austerity measures before the IMF disburses a further tranche of €3.5bn in loans.
Athens is currently awaiting the final tranche of €1.8 billion euros from the European Financial Stability Facility.
Greece must also put forward proposals to the troika on how it will meet a projected €2 billion budget gap in 2015.
The index reshuffle was made to the S&P Dow Jones emerging markets BMI index and at the same time Qatar and the United Arab Emirates stock indices were promoted from frontier to emerging markets status with a weighting of 0.9pc and 1.0pc in the index respectively.
The reclassification by S&P Dow Jones Indices follows the move by the more widely followed MSCI and Russell Indexes last year who also downgraded Greece to emerging market status. The FTSE index has Greece on its developed market watch list.
The changes to the S&P Dow Jones emerging BMI index will become effective on September 22