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1 MSCI, “Results of MSCI 2018 Market Classification Review,” Jun 20 2018.
2 IMF, “IMF Executive Board Approves US$50 Billion Stand-By Arrangement for Argentina,” Jun 20, 2018.
On Thursday, June 21st, MSCI announced the MSCI Argentina Index will be reclassified to Emerging Market status from Frontier Market status.1 This change is set to take effect in May 2019, with Argentina expected to represent approximately 0.4% in the MSCI Emerging Markets Index. While Argentina’s most recent economic woes demonstrate its prospective challenges, international consensus remains sufficiently confident in Argentina’s long-term commitments to boosting market access and facilitating international investment.
MSCI’s announcement, made on the heels of a $50 billion International Monetary Fund (IMF) credit line approval,2 attests to the progress Argentina has made since its 2009 downgrade to Frontier Market. This centers around positive international reception of President Macri-led reforms – including the removal of capital controls and settling with foreign creditors– which are foundational steps in opening the Argentine economy.
In the announcement, MSCI cited international institutional investors’ confidence in Argentina’s ability to maintain market access as a primary justification for the upgrade. MSCI also clarified that the index would only include foreign listings of Argentinian companies, such as American Depositary Receipts (ADRs), notably excluding domestic listings on the Buenos Aires Stock Exchange due to better liquidity abroad.
Although Argentina will need to manage its balance of payments, real exchange rates, and inflation, IMF approval and MSCI reclassification present dual votes of confidence from the international monetary and investment communities. These judgments are suggestive of Argentine potential and affirm international investors’ interest in Argentina.
Related ETFs
ARGT: The Global X MSCI Argentina ETF invests in among the largest and most liquid securities with exposure to Argentina.
We left Argentina and Chile cautiously optimistic for several reasons, including the region’s natural resources and potential for market-friendly reforms.
Trevor Yates
Malcolm Dorson
