MercoPress. South Atlantic News Agency

Buenos Aires stock market downgraded to “frontier index”

MSCI Barra a leading stock market index provider has decided to remove Argentina from its emerging market index and place it in its frontier markets index. The frontier markets index contains stocks from countries considered not sufficiently developed to be eligible for MSCI Barra's emerging markets index.

MSCI Barra said it had reclassified Argentina as a result of the "continued restrictions to in- and outflows of capital" in the equity market. MSCI Barra said Argentina's reclassification will coincide with its semi-annual review in May and only US Depositary Receipts of Argentine firms would be eligible for inclusion in its Argentina Index. In Buenos Aires, Marcelo Paccione, an analyst at ConsulCapital, said talk of a possible reclassification had been circulating for some time, and recent low trading volumes on Argentina's Merval benchmark index reflected diminishing interest from international investors. "The news isn't affecting the market because most of the trade is being carried out by domestic investors," Paccione said. Argentina's market was already losing relevance and volume before the MSCI said last year it might downgrade the country's index status. In October the Argentine government took over the country's 14-year-old private pension system, wiping out in one fell swoop the local market's top source of liquidity. Meanwhile, in November the MSCI cut heavyweight Tenaris (TS) from its Argentine stock international benchmark. The steel pipe maker, a unit of Argentine-Italian conglomerate Techint Group, ceased to be part of MSCI Barra's Argentina index on November 30, migrating instead to MSCI's Italian index. Overnight, the Argentine index lost about two-thirds of its market capitalization. Argentina's Merval stock index is heavily dominated by Tenaris and the Brazilian oil giant Petrobras (PBR), which has only a supplemental listing. The movement of these two stocks alone can easily determine the index's performance. There are 14 companies on the Merval, Buenos Aires stock market.