J.P. Morgan upgraded its rating on Greece to "overweight" from "neutral", citing expected inflows of about $1 billion from the inclusion of certain Greek shares on the European stock benchmark later this year.
The entry into the Euro STOXX TVC:SXXP index is expected during a September 18 rebalance, the brokerage said, while upgrading the rating on its CEEMEA equity allocation.
Greece has recovered from a debt crisis that began in 2009, with the government repaying bailout loans and reducing debt ahead of schedule.
Global index provider MSCI NYSE:MSCI said last month that it plans to reclassify Greece to developed-market status in 2027, underscoring the country's economic and financial recovery, after having downgraded it in 2013.
J.P. Morgan said Greece could draw demand from both developed- and emerging-market investors during an eight-month transition period in which it remains in MSCI Emerging Markets CBOE:EFS while joining a major European index.
The country's banks, which were recapitalised during the crisis, are now fully back in private hands, with several lenders having resumed dividend payments.
The Wall Street brokerage expects four of the country's biggest lenders - Eurobank ATHEX:EUROB, National Bank of Greece ATHEX:ETE, Piraeus Bank ATHEX:TPEIR and Alpha Bank ATHEX:ALPHA - to be included in the STOXX index.
The benchmark Athens stock index ATHEX:EXAE has also reflected the recovery, posting its strongest annual performance since 2019 last year. It has more than tripled in value since 2021.
J.P. Morgan said Greek equities continue to trade at a discount relative to broader emerging markets despite a recovery in the country's banking sector. Greece trades at 10.8 times 12-month forward earnings versus 11.3 times for emerging markets, according to its data.
Politically, the brokerage said, the center-right New Democracy party remains the favorite to win the next election, supporting a stable policy environment.