In its semi-annual review for May 2019, leading index provider Morgan Stanley Capital International (MSCI) confirmed the inclusion of eight Argentinian securities into its MSCI Emerging Markets Index, as well as the MSCI ACWI Index.
MSCI first announced that it planned to upgrade Argentina from a Frontier Market to an Emerging Market in its May 2018 review last year and has now confirmed that the eight companies will comprise an aggregated 0.26% of the MSCI Emerging Markets Index.
The securities that will be added are primarily American Depository Receipts (ADRs) already listed on Wall Street, meaning that domestically listed companies will not be included for the time being. The stocks that will be included in the MSCI Emerging Markets Index are:
- Banco Macro (Financials)
- BBVA Banco Frances (Financials)
- Globant (Information Technology)
- Grupo Financiero Galicia (Financials)
- Pampa Energia (Utilities)
- Telecom Argentina (Communications)
- Transportadora de Gas del Sur (Energy)
- YPF (Energy)
As a result of the upgrade, 14 securities will be removed from the MSCI Frontier Markets Index, including the eight mentioned above, Arcos Dorados, Central Puerto, Coporacion AM Airports, Despegar, Edenor and Loma Negra. These securities will be added to the MSCI Global Small Cap Index instead.
Argentinian securities will no longer be available for the MSCI Frontier Markets 15% Capped and MSCI Frontier Markets ex-GCC 15% Capped Indexes, though they will be retained in the MSCI Frontier Emerging Markets (FEM) Index and will be reviewed as part of the Emerging Markets Annual Eligibility Review in August 2019.
JP Morgan has estimated that there will be inflows of US$1200m as a result of MSCI’s reclassification. The positive news will be welcomed by many officials and investors in Argentina who have currently been navigating through political and financial turmoil.
MSCI also announced that 30 Saudi Arabian securities will be included in the MSCI Emerging Markets Index with a combined weight of 1.42%. All changes will be implemented as of the close of May 28th.