Shares of the Global X FTSE Greece 20 ETF (NYSE:
), the lone ETF devoted to the "G" in the infamous PIIGS acronym,
are off by more than three percent following news released late
last week that index provider Russell Investments has demoted
Greece to emerging markets status.
Russell, one of the top providers of benchmark indexes for ETF
sponsors, said Greece "has been on a path toward reclassification
as an emerging market since 2010, having failed the operational
and/or macro risk portions of our review over the past two years.
During our 2013 global market risk reviews, when we again
evaluated the two risk profiles, Greece failed both tests."
The comments were made in a
research note posted on the firm's web site
News of Greece's slide to emerging market from developed is
not surprising as at least
one other major index provider has the country on
a list for possible demotion
In June 2012, MSI (NYSE:
) said "[t]he MSCI Greece Index is structurally no longer in line
with Developed Markets size requirements with only two index
constituents. If these two remaining index constituents were to
experience further decrease in size, MSCI may be forced to
discontinue the calculation of the MSCI Greece Index."
To its credit, GREK has been able to ward off myriad bad
headlines over the past year. From possible loss of Greece's
developed market status to speculation that Greece would leave
the eurozone to news that its largest holding was
leaving Athens for a London listing
, GREK had managed to gain over 12 percent in the past year prior
to the start of trading today.
Another potential problem for Greece, and by virtue GREK, is
the size Greece would have in various emerging markets indexes
should it be demoted. Even at its peak in 2007, the total market
capitalization of the Greek equity market was just $273
The number is nowhere close to that today and even Greek
equities regained peak market values, they would still trail
major members of the Russell Emerging Markets Index.
The top five country weights in the index are China, South
Korea, Brazil Taiwan and India,
according to Russell data
To illustrate just how small of role Greece is likely to play
in major emerging markets indexes, that is if other index
providers follow Russell's lead, the combined market value of
Athens-listed firms at the end of last year was just over $26
billion, according to Russell. By comparison, the largest market
capitalization found in the Russell Emerging Markets Index at the
end of January was over $271 billion.
GREK, which debuted in December 2011, had over $28 million in
assets under management as of March 1.
For more on
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