Friday dawned in Wall Street with the news that MSCI had decided to demote Argentina's economy two notches, from Emerging to Stand Alone and what Buenos Aires analysts feared by Thursday evening has become true.
YPF's stock listed on Wall Street fell 9.2%, Edenor lost 7.5%, and Banco Francés Argentina went down 5 per cent. These negative results also had an impact on the Buenos Aires stock market, where the S&P Merval index contracted more than 4 per cent.
Argentine companies' sinking in New York had been foreseen following MSCI's announcement Thursday that Argentina would no longer belong to the Emerging markets index next year after joinging that category in 2018.
But MSCI's rating was even lower than expected, as it placed Argentina even below Frontier economies, which would have allowed some manoeuvring within financial markets.
The downgrading itself came as no surprise for an economy that imposes harsh restrictions on currency exchange. In fact, by Friday noon, the Argentine peso was falling noticeable on the unofficial market, according to reports.
The Argentine stock market traded sharply on Friday in response to the decision of the world's largest index provider, MSCI, to reclassify the country as a 'standalone (independent) market, from the 'emerging' level, given the prolonged application of controls on capital.
The S&P Merval stock index of the Buenos Aires stock exchange lost 4.1%, at 64,211 points at 12:30 pm, after having reached a nominal historical maximum level of 69,688 in the first half of the month.
Indexes can funnel billions of dollars of tracking funds into developing economies. Changes in the grading tend to divert those funds to other, more promising destinations.
Argentina reached an understanding with the Paris Club in its negotiation for a debt of about US $ 2,400 million, through a bridge agreement until March 31, 2022, to renegotiate debt payments to the International Monetary Fund (IMF) as well.