Argentina’s status as a Frontier Market in the FTSE Frontier Index Series may be under threat after FTSE Russell announced that the country may be removed from its Frontier Indexes after the country imposed capital controls last year.
In an announcement on Friday 31st January, FTSE Russell stated that the Banco Central de la Republica Argentina’s (Central Bank of Argentina, “BCRA”) decision to impose capital controls beyond the 31st December 2019 without stating an expiration date has forced the index provider to review the eligibility of Argentinian equities in its Frontier Index Series. Argentina was recently removed from the watch list for a potential upgrade to a Secondary Emerging Market due to the BCRA’s announcement of capital controls.
FTSE Russell has listed four scenarios regarding the the treatment of Argentina within the FTSE Frontier Index Series and the FTSE Equity Country Classification scheme:
- Subject to the capital controls not being removed by Friday 13th March 2020, locally listed Argentinian securities within the FTSE Frontier Index Series will be deleted at zero price and US-listed securities deleted at their last trade price. This will be effective from the open on Monday 23rd March.
- If capital controls are removed between Monday 16th March and Friday 20th March, then FTSE Russell will confirm whether or not locally listed lines will be deleted at zero price of their last trade price.
- If capital controls are not removed by market close on Monday 20th March 2020, Argentina will be placed on the Watch List for potential downgrade from Frontier to Unclassified Market status.
- Finally, if capital controls are still in place by Monday 28th September 2020, then Argentina will officially lose its place as a Frontier Market in FTSE Russell’s Country Classification and be moved to an Unclassified Market.
There is also talks of rival index compiler MSCI considering reclassifying Argentina after it recently promoted it to an Emerging Market. Despite the MERVAL Index ranking as the best Frontier Market in 2019, it may struggle this year if capital controls are to remain throughout the year as index compilers and investors keep a close eye on any future market developments.