STOCKS NEWS EUROPE-Go underweight as Greece enters EM-C.Suisse

As Greece prepares to enter MSCI (NYSE: MSCI - news) 's emerging market indexes after Tuesday's close, Credit Suisse (NYSE: CS - news) recommends investors take an underweight stance on the country in the global portfolios.

"Greek macro is on a path to recovery ... but this has yet to be reflected by signs of life from the consumer," analysts at Credit Suisse write, adding that they believe the Greek banking system is not yet fully recapitalised.

Other reasons for caution on Greece - which returns to the emerging universe over a decade after being promoted to a developed market - include the low correlation of its equities with the euro zone recovery and strong reliance on domestic revenues.

Ten Greek companies will enter MSCI's Emerging Markets index on Nov. 27, potentially bringing in billions of dollars of investment as funds tracking or benchmarked to the index adjust their portfolios.

The Greek ATG index is up by around a third so far this year - twice as far as the pan-European FTSEurofirst 300, pushing up valuations.

According to Credit Suisse's HOLT valuation model, Greece now trades on a 140 percent premium to the global emerging market (GEM (Shenzhen: 002340.SZ - news) ) universe based on 12-month forward earnings consensus.

"On our October marketing trip we encountered broad client appetite towards Greece with the rationale principally focused on the market now appearing oversold-thus potentially appearing attractively valued," the analysts write.

"But we question whether Greece really belongs within the emerging market index series ... We believe that Greece lacks the potential for growth in productivity, demographics, urbanisation, credit extension and investment spending ... (although looking at perceived levels of corruption and difficulty of doing business does make Greece appear distinctly emerging)."

Reuters messaging rm://antonina.vorobyova.thomsonreuters.com@reuters.net