FTSE Russell has announced in its September 2019 Country-Classification Review that Argentina will remain as a Frontier Market and has been removed from the Watch List for a potential upgrade to Secondary Emerging Market after it imposed capital controls earlier this month.
Argentina was added to the Watch List in September 2018 for the possible reclassification to Secondary Emerging Market status, but the recent capital controls have prevented the country from leaving FTSE’s Frontier Market classification and prompted its removal from the Watch List. The index compiler highlighted the fact that the “No objection to or significant restrictions or penalties applied to the investment of capital or the repatriation of capital and income” criteria was downgraded from “Pass” to “Not Met”.
The move to not upgrade the country is a contrast to rival index provider Morgan Stanley Capital International’s (MSCI) decision to reclassify Argentina as an Emerging Market earlier this year, though MSCI is now currently reviewing this move (which was done before capital controls were introduced) and may even strip it of its Emerging Markets status if these barriers remain for a prolonged period of time.
This will be seen as another blow to President Mauricio Macri, who is still reeling from the recent election trouble against his left-wing opposition, as well as overseeing record lows in the bond and currency markets. An upgrade would have provided much needed capital inflows into Argentina.
FTSE Russell will continue to liaise with Argentinian market authorities in order to ascertain the length of these capital controls and the long-term impact it will have on the country’s market classification. For the time being, the index compiler will retain Argentina’s 9.75% position and eight constituents in the FTSE Frontier 50 Index.
FTSE Russell have also announced the following:
- Vietnam remains on the Watch List as a Frontier Market.
- Romania has been assigned Secondary Emerging Market status having previously been classified as a Frontier Market.
- Tanzania will be assigned Frontier Market status.