By George Georgiopoulos. With additional reporting by Khaled Diab in Cairo.

ATHENS, April 9 (Reuters) – All bets on which new stocks from Greece, Egypt and Morocco will join Morgan Stanley Capital International's (MSCI) rebalanced indices will close at the end of trade on Tuesday as speculation about the outcome mounts.

Index compiler MSCI, which claims to be the most widely used benchmark for international equity investment, will unveil the new constituents of its rebalanced indices for the three countries at 2015 GMT on Tuesday.

The revamped Greece index, which includes around 40 stocks, will leave emerging markets and enter the standard MSCI developed market index series on May 31, which will bring an upgrade into MSCI Europe and EAFE (Europe, Asia, Far East ) as well.

Schroder Salomon Smith Barney estimates Greece's upgrade to developed stock market status by Morgan Stanley Capital International could bring gross inflows of $2 billion into Greek equities.

The rebalanced Egypt and Morocco indices will join MSCI's emerging markets free (EMF) index series.

“We expect the immediate price reaction would be strongest for the new Greece additions,” said Credit Suisse First Boston (CSFB) analysts Hon Wai Lai and Philipp Kauer in a report.

“The reaction to any demotions probably would be muted because MSCI Greece is currently in the MSCI emerging markets free (EMF) which does not have a significant level of passive investment, and therefore should not attract passive selling.”

GREEK STOCKS ON MSCI CATWALK
CSFB picked 10 Greek equities as the most likely new additions in MSCI's rebalanced index - all falling within 85 percent of their industry group, liquid and without large cross-holdings.

They include Alfa Alfa Holdings, Altec, Piraeus Bank, Germanos, Infoquest, Intralot, Intrasoft, Panafon, Teletypos and Heracles.

If CSFB is right on Tuesday, friends of textiles group Klonatex won’t be celebrating. The stock is touted for removal, its market capitalisation has fallen significantly and its industry group is already well represented.

All-in, CSFB estimates MSCI Greece will have a weight of 0.62 percent in MSCI EAFE.

EGYPT ON FOREIGN RADAR SCREENS
Although Egypt has had its own MSCI stand alone index for the last five years, analysts are upbeat that inclusion in the emerging markets free series will boost foreign investor confidence and attract passive funds to the Cairo market.

Companies seen benefiting the most include Commercial International Bank (CIB) and Al Ahram Beverage, both with a high free-float and market capitalisation.

“Inclusion in MSCI indices will have a domino effect on the entire market,” said Amr Waked, head of institutional sales at ABN AMRO Delta Securities.

MSCI, which announced index construction methodology changes in December 2000, will pick constituent stocks based on a free-float adjusted market capitalisation, also increasing its targeted market cap coverage to 85 from a previous 60 percent.

Its advance notice is intended to provide investors with more time to understand and adjust to the changes before they go into effect.

The index designer plans to unveil the constituent stocks of its rebalanced indices for all countries before June 30 this year, an event that may well mark the start of massive global portfolio flows.

ã Reuters Limited 2001.

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