Why Argentina is Not an Emerging Market

Argentina failed to win back its status as an emerging market in June, remaining in the ranks of the frontier markets until at least 2018. What does this mean for investors?

Karen Kwok 13 July, 2017 | 9:47AM

This article is part of the Morningstar's Guide to Emerging Market Investing. Click here to find out just what an emerging market is and which regions hold the potential to boost your investment portfolio.

Argentina failed to win back its status as an emerging market in June, remaining in the ranks of the frontier markets until at least 2018. The Argentinian stock market the Merval dropped more than 5% on the day after the announcement, while the currency peso fell 2%. Indexer MSCI, which reviews market classification once a year, said Argentina was moving in the right direction, but it was too soon to upgrade the country.

“Although the Argentinian equity market meets most of the accessibility criteria for emerging markets, the irreversibility of the relatively recent changes still remains to be assessed, including the removal of capital controls and currency restrictions, needed to remain in place for a longer time period to be deemed irreversible,” MSCI said in a published statement.

In December 2015, the Argentinian Central Bank abolished foreign exchange restrictions and the capital controls that had been in place for a number of years. These changes have resulted in a floating currency, the elimination of cash reserves and monthly repatriation limits affecting the equity market and the abolishment of the capital lock-up period for investments, MSCI added.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
M&G Global Emerging Markets GBP A Acc238.16 GBP0.41

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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