June 21, 2017 / 4:28 PM / a year ago

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

    By Bruno Federowski
    SAO PAULO, June 21 (Reuters) - The Argentine peso on
Wednesday fell to its weakest 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
    Macri has repealed the capital controls and foreign exchange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, with all
components in negative territory. Shares of Pampa Energia SA
 led the losses, dropping 8.5 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
1 percent to a record low.
    "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 inched up 0.2 percent, rebounding
from a sharp decline on Tuesday, but falling crude prices kept a
lid on gains. Brazil's benchmark Bovespa stock index rose 0.2
percent as shares of miner Vale SA tracked iron ore
    Shares of meatpacker Minerva SA fell 1 percent
after Reuters reported a judge blocked the $300 million purchase
of JBS SA's South American assets. Shares of JBS rose
0.8 percent.

    Key Latin American stock indexes and currencies at 1615 GMT:
 Stock indexes                            daily %   YTD %
                               Latest      change  change
 MSCI Emerging Markets           1005.86    -0.28   16.98
 MSCI LatAm                      2483.43    -0.32    6.44
 Brazil Bovespa                 60879.63     0.19    1.08
 Mexico IPC                     49107.61     0.15    7.59
 Chile IPSA                      4773.46    -0.46   14.98
 Chile IGPA                     23915.25    -0.42   15.34
 Argentina MerVal               20635.87    -4.71   21.98
 Colombia IGBC                  10705.02    -0.79    5.70
 Venezuela IBC                 121345.13     2.18  282.73
 Currencies                               daily %   YTD %
                                           change  change
 Brazil real                      3.3309    -0.02   -2.45
 Mexico peso                     18.1655     0.17   14.19
 Chile peso                        664.6    -0.14    0.92
 Colombia peso                   3048.61    -0.67   -1.55
 Peru sol                           3.27     0.06    4.40
 Argentina peso (interbank)      16.3200    -0.98   -2.73
 Argentina peso (parallel)         16.67    -0.18    0.90

 (Reporting by Bruno Federowski; Editing by Meredith Mazzilli)
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