We have warned over and over that the downgrade cycle has not ended for the PIIGS and in Europe. While that is a viewpoint we see as being generally true and with many challenges remaining, the rate of these downgrades and the rate of expected downgrades is getting better. Some incredible news has been released today that almost seems too good to be true: S&P RAISED GREECE’s CREDIT RATINGS!

We would caution here that this is more or less a removal of what had been considered a selective default (SD) rating. That may not be as much of an upgrade as a “true upgrade,” but the “Stable” outlook that was issued really stands out. S&P raised the nation of Greece to ‘B1/B’ from “SD” and the outlook is considered “Stable.” Now that Greece has completed its distressed debt buyback we were expecting this “SD” rating to be removed. That being said, we would have not expected anything but a “Negative” outlook.

This may not be the ultimate end of the credit rating downgrades. Still, this is a very welcome sign to see. S&P said that this reflects a view of a strong determination of the Eurozon to keep Greece in the union.

As this is not exactly a true upgrade as you might have expected historically, the move is having a limited impact on Greek shares. The ADRs for National Bank of Greece SA (NYSE: NBG) are up only 0.6% at $1.68 in New York. The Global X FTSE Greece 20 ETF (NYSEMKT: GREK) is actually down 0.7% at $16.44 on the day. Coca-Cola Hellenic Bottling Company S.A. (NYSE: CCH) has been somewhat insulated from the woes of late, and its ADRs are down 0.5% at $21.46 on the day.

Again, this is not an upgrade we would treat as a traditional upgrade. It is that “Stable” rating that really stands out.

JON C. OGG

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