JPMorgan predicts $275 million net outflow from Greek stocks

JPMorgan Chase analysts project net capital outflows of approximately $275 million from Greek equities following Greece's reclassification from emerging to developed markets by MSCI Inc. The change, scheduled to take effect in May, is expected to trigger $5.1 billion in sales from funds tracking emerging market indices.

While developed market funds are anticipated to purchase $4.8 billion in Greek stocks, the net impact on passive investment flows is expected to be negative. Analysts led by Pankaj Gupta note that the reclassification will result in significantly lower weightings for Greek stocks in new benchmark indices. For instance, Greece's weighting in the MSCI World Index is estimated at just 0.06%, compared to its current 0.61% in the MSCI Emerging Markets Standard Index.

Although the MSCI upgrade marks a significant milestone in Greece's economic recovery from its debt crisis, the transition is expected to limit the weighting of Greek stocks in the indices to which they will be integrated. Seven of the ten Greek stocks currently in the emerging markets index are expected to move to the developed markets index.