BUENOS AIRES (Dow Jones)–Argentina’s biggest securities exchange, the Bolsa de Comercio de Buenos Aires, hopes to convince index provider MSCI Barra (MXB) to upgrade the country to its emerging market index.
Adelmo Gabbi, president of the exchange known as the BCBA, said Thursday in an interview that he wants to personally meet with MSCI Barra representatives in the next few days to make his case.
«Argentina has a mature capital market. Besides, we are funding nearly all of the financing activity of [consumer] products for the middle class,» he said in reference to the torrent of securities backed by consumer loans that banks have sold on the local market.
MSCI Barra executives weren’t immediately available for comment.
In May 2009, MSCI Barra moved its MSCI Argentina Index to the MSCI Frontier Markets Index from its MSCI Emerging Markets Index following a consultation with investors.
The move led to a significant drop in trading volumes on the BCBA as funds that track the index reduced their holdings of Argentine stocks following the country’s demotion to frontier status.
The index provider based its decision on capital controls in Argentina’s equity market, the most onerous of which requires that nonresidents deposit the equivalent of 30% of any money they bring into the country for financial investments with the central bank for one year.
President Cristina Kirchner contends the controls are necessary to prevent speculative capital flows from wreaking havoc with the exchange rate.
A return to the emerging market index would likely trigger significant investment flows into the local capital market.
Gabbi said the same institutional investors who sought the downgrade were once again active buyers of Argentine stocks like oil and gas producer YPF SA (YPF, YPFD.BA).
The BCBA likely faces an uphill battle to convince MSCI Barra to change its mind. Even though many investors see South Korea and Taiwan as developed countries, MSCI Barra continues to classify both as emerging markets due to the lack of full convertibility of their currencies.
Though Argentina is the No. 3 economy in Latin America, daily turnover on the BCBA trails those of many other nations in the region due to the capital controls and the nationalization of the private pension system during the peak of the 2008-09 global crisis.
Daily trading volume in all asset classes averaged ARS830.4 million ($197 million) during the last 12 months, with trading in stocks averaging just ARS62.5 million. In August, the total market capitalization of local companies listed on the exchange was about $53 billion.
The volume of corporate bonds and asset-backed securities sold in Argentina more than doubled to ARS15.4 billion during the first half of the year as a booming economy that is expected to grow about 8% this year spurred companies to seek financing.
But initial public offerings have been few and far between in the last decade owing to the lack of domestic investors and the reluctance of closely held firms to open their books to outsiders. The IPO of real-estate company TGLT SA (TGLT.BA) last October was the first IPO in two and a half years.
On Thursday, shares of egg products company Ovoprot International SA started trading on the BCBA. Ovoprot raised about ARS30 million in the first IPO of the year.
Source: online.wsj.com