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Setting Up For A Big Fall In Argentina

Argentina has been a star performer in the equities market this last year, with the Global X MSCI Argentina ETF (NYSEARCA:ARGT) up 54%. Since the U.S. election, ARGT is up 9%, leading all Latin American countries.

Much of the momentum in Argentina has been due to the optimism surrounding President Macri and the reforms implemented since taking office in December 2015. Since then, the Argentinean Central Bank abolished foreign exchange restrictions and relaxed the capital controls that have been in place for a number of years. The changes have resulted in, among other things, a currency whose value fluctuates in response to the foreign-exchange market and improvements in liquidity. Consequently, the Argentinean equity market meets most of the accessibility criteria to be considered an emerging market.

Emerging Markets status

Argentina is the only Latin American country other than Venezuela that is not in the MSCI Emerging Market Index, despite being the third largest economy. There are a multitude of reasons why Argentina is not in the index, but the changes initiated by President Macri have led to MSCI's decision in June of 2016 to review the country for a potential upgrade from Frontier to Emerging Market status.

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by Steve Auger