June 21, 2017 / 9:05 PM / a month ago

EMERGING MARKETS-Argentine peso, stocks slump after surprise MSCI snub

5 Min Read

 (Updates with closing prices)
    By Bruno Federowski
    SAO PAULO, June 21 (Reuters) - The Argentine peso on
Wednesday fell to its weakest level ever while stocks tanked
after index provider MSCI unexpectedly decided not to include
the country in its emerging markets index.
    MSCI said it needed more signs that center-right President
Mauricio Macri's pro-market reforms were "irreversible" to
reincorporate the country's shares into its Emerging Markets
Index.
    Macri has repealed the capital controls and foreign exchange
restrictions that drove MSCI to downgrade Latin America's No. 3
economy to "frontier" status.
    Argentina's benchmark Merval stock index fell nearly
5 percent, its biggest daily decline since January 15. Shares of
Pampa Energia SA led the losses, dropping 8.35 percent.
    The index had risen nearly 25 percent in 2017 as traders
anticipated increased inflows from funds tracking the MSCI
index. As those expectations faded, the peso weakened
as much as 1 percent to a record low before recovering slightly.
    "There is no longer any rush for passive funds to get in,
and those who have been buying in advance of an expected
reclassification will probably now look to take some money off
the table," strategists at Itaú BBA wrote in a note to clients.
    However, "we still have a positive view of the current
domestic dynamics in Argentina, both political and economic."
    Trading in other Latin American markets was skittish,
tracking volatility in commodity prices.
    The Mexican peso weakened by 0.1 percent, adding to
a sharp decline on Tuesday, with falling crude prices pressuring
the currency. Brazil's benchmark Bovespa stock index edged down
0.01 percent, while shares of miner Vale SA tracked
iron ore higher.
    Shares of meatpacker Minerva SA fell 1.6 percent
after Reuters reported a judge blocked the $300 million purchase
of JBS SA's South American assets. Shares of JBS rose
5.32 percent.

    Key Latin American stock indexes and currencies at 2030 GMT:
 Stock indexes                              daily %   YTD %
                               Latest        change  change
 MSCI Emerging Markets           1006.47      -0.22   16.72
                                                     
 MSCI LatAm                      2480.19      -0.45    5.96
                                                     
 Brazil Bovespa                 60761.74      -0.01    0.89
                                                     
 Mexico IPC                     48983.45       -0.1    7.32
                                                     
 Chile IPSA                      4752.45       -0.9   14.48
                                                     
 Chile IGPA                     23818.33      -0.82   14.87
                                                     
 Argentina MerVal               20614.35      -4.81   21.85
                                                     
 Colombia IGBC                  10665.48      -1.15    5.31
                                                     
 Venezuela IBC                 121418.08       2.24  282.96
                                                     
                                                           
 Currencies                                 daily %   YTD %
                                             change  change
                                  Latest             
 Brazil real                      3.3292       0.08   -2.40
                                                     
 Mexico peso                     18.2235      -0.15   13.83
                                                     
 Chile peso                        665.2      -0.23    0.83
                                                     
 Colombia peso                    3057.2      -0.95   -1.82
 Peru sol                          3.271       0.03    4.37
                                                     
 Argentina peso (interbank)      16.2100      -0.31   -2.07
                                                     
 Argentina peso (parallel)         16.65      -0.06    1.02
                                                     
 

 (Reporting by Bruno Federowski; Editing by Meredith Mazzilli
and Diane Craft)
  

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