BUENOS AIRES, June 25 (Reuters) - Argentina's S&P Merval
stock index closed down some 2.7% on Friday after MSCI
yanked the country's emerging market status and reclassified it
a "standalone" market over continued tough capital controls
limiting accessibility for investors.
Index provider MSCI said on Thursday it would reclassify the
MSCI Argentina Index from Emerging Markets to Standalone Markets
status during its November index review, due to the "prolonged
severity of capital controls with no resolution."
Indices can funnel billions of dollars of tracking funds
into developing economies. A status downgrade can spark forced
selling by funds, hitting locally listed companies hard.
The Merval index, which has climbed sharply since April,
dropped a maximum 5.74% before slightly rebounding. Among the
biggest drops were local-listed shares of state oil company YPF
and financial firm Grupo Supervielle.
U.S.-listed shares of Argentine IT services firm
slipped in early trading, but recovered to end only marginally
down for the day. MetroGAS SA was down around 6%.
Some analysts pointed out that the downgrade was already
partially baked into prices given the country has been warned
before and capital controls have now been in place since 2019.
"Stock prices are already discounting a very punished market
and with a lot of bad news on top of it, so this novelty of
going to 'Standalone' isn't a very strong change in market
sentiment", said consultancy Portfolio Personal Inversiones.
"Beyond the movement we're seeing currently with the noise
of this news, the market trend will be guided by the
(midterm)elections, negotiations with the IMF and Paris Club,
and the economic plan for the coming years," it added.
Argentina this week struck a deal with the Paris Club group
of country lenders to defer $2 billion in payments until March
next year, gaining some breathing room in larger debt talks with
the International Monetary Fund.
(Reporting by Walter Bianchi and Jorge Otaola; Writing by Adam
Jourdan; editing by Jonathan Oatis and Marguerita Choy)