LONDON, Sept 22 (Reuters) - Index provider FTSE has cut Argentina from its frontier equity index, citing the country's stringent capital controls, while relegating Morocco from emerging to frontier markets, the company said on Monday.
FTSE has more than $1 trillion benchmarked against its indexes overall, with $51 billion of ETFs tracking its emerging equity indexes. The changes, which will come into effect next June, are part of its annual country classification review.
Argentinian President Cristina Fernandez introduced currency and capital controls for Latin America's third-largest economy in late 2011, shortly after starting her second term. Early this year, the country slid into recession and Buenos Aires defaulted on a sovereign bond in July.
FTSE said Argentina would be demoted to "unclassified market status".
Buenos Aires peso-based equity index has risen 114 percent so far this year while MSCI's dollar-denominated Argentina index has returned 28 percent.
FTSE has also reclassified Morroco as a frontier market from Secondary Emerging after liquidity continued to decline, it said. FTSE divides emerging economies into advanced and secondary markets on the basis of income and market infrastructure.
Argentina, together with Morocco, is still classified as a frontier market by rival index provider MSCI.
FTSE also said it had added both Latvia and Palestine to its watch list for a possible move to its Frontier markets index. Mongolia and Kazakhstan are the other countries already under consideration for inclusion in FTSE's frontier index. (Reporting by Karin Strohecker; Editing by Hugh Lawson)