February 7, 2023

Valley Post

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Election bets and investment grade

Investment grade will be one of the two main themes of the Greek market in the year starting in nine days. The other issue is the national elections, government and power alliances that will come out of the ballot box with a deadline of July 9th.

This is the extreme scenario of the four-year period being exhausted, whereas if there were to be second ballots, the process would be repeated on September 3 with increasing proportionality. Election and investment grade are not two independent events. There are not a few who would argue that stability of government and the four-year horizon of government that will result from elections – whenever they are held – is an essential prerequisite for capping the final remaining steps of the Great Detente. Therefore, the time actually begins to flow from the day after the formation of the government.

The level of investment is nothing new for the Greek economy. Until January 14, 2011, there was one of the three main appraisers who gave Greek bonds investment grade. Since then, Greek debt has moved to the level of bankruptcy only to revert today to non-investment and speculative grade.

The criteria you specify from time to time as a condition of changing their position (debt to GDP, banks, primary surpluses, etc.) Greek economy.

The investment grade will not be just a verbal reward for the country’s financial efforts. It has a tangible and significant impact on many economic measures. On the one hand, Greek bonds acquire another more conservative pricing method, and on the other hand, the risk premium reference point is adjusted lower, which increases the potential value of corporate cash flows.

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On a more practical level, Greek assets have access to another class of investors, much stronger in capital, which defines as a prerequisite for investment the presence of an investment grade. This standard relates not only to government and corporate bonds and stocks, but also to private investments. In this sector in particular, there is a lot of scope for the introduction of new names on the commercial or financial level that will seek to obtain returns in the developed sectors of the economy.

The modernization of the Greek economy will have a direct impact on the banking sector. The ratings will also upgrade the creditworthiness of banks with what that means for the cost of securitizing or issuing bonds to cover MREL indices. The same applies to corporate bonds to be issued by companies with a high financial rating, which makes the financing cost competitive for their business plan.

We said otherwise: elections first, then the rest. At the moment, we have heard good words and we also have a promising development plan for 2023. It remains to be seen in practice.

Greek debt appraisal dates