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Argentina's currency restrictions may jeopardize FTSE Russell reclassification

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Argentina's currency restrictions may jeopardize FTSE Russell reclassification

Argentina's recent imposition of currency controls might push index provider FTSE Russell to delay a potential upgrade of Argentine stocks to emerging market status, Reuters reported.

FTSE Russell is currently reviewing Argentina for a possible upgrade from the country's frontier status and is due to announce a decision on Sept. 26.

Argentine President Mauricio Macri on Sept. 1 announced the reintroduction of capital controls to limit foreign currency purchases and stem the peso's fall. The move requires companies and individuals to obtain central bank approval for foreign currency purchases.

"Given the enormous change that's taken place in recent weeks, I think it would be reasonable to take that into account and postpone a decision for an upgrade," Reuters quoted Jan Dehn, head of research at emerging markets investment manager Ashmore Group, as saying.

Vikram Lopez, quantitative analyst for Renaissance Capital's macro-strategy team, said FTSE Russell would be justified if it decided not to upgrade Argentina for now.

According to the index provider's guidelines, FTSE Russell will evaluate removing stocks from its indexes if a government applies restrictions for more than 20 local business days that deter foreign investors from repatriating capital.

Another index provider, MSCI, recently said fresh capital control in Argentina could lead to "material deterioration of an equity market's accessibility" and could result in the "reclassification of the MSCI Argentina Index to stand-alone market status."