Overdue Face-Lift May Be En Route for Argentina's Stock Market

(Bloomberg) -- Craving a piece of Argentina, but wary of how little a company must disclose to list on the stock exchange?

Investors will soon have the chance to buy into a premium segment for companies that voluntarily adhere to a set of higher governance guidelines.

The Argentine stock exchange is planning to create a segment modeled on Brazil’s "Novo Mercado" in the first half of 2018. It will have greater standards for disclosure and corporate governance to protect retail investors, increase liquidity and attract institutional money, Bolsas y Mercados Argentinos (BYMA) president Ernesto Allaria said in an interview.

"We will impose requirements on percentage of float, board make-up and shareholder voting," Allaria said. The move is expected to attract investors in a market where the Merval index is already the top performer in the region in U.S. dollar terms.

The inclusion of shares in an upgraded market division may help to bolster value for those companies willing to up the ante, akin to what Brazilian companies go through when they look to the Novo Mercado, he said.

Shares of Salvador, Brazil-based Suzano Papel e Celulose SA, for example, have jumped more than 44 percent since July 31, when the controlling Feffer family announced their decision to list their shares in the segment.

"Brazil has the best corporate governance standards in Latin America, primarily due to the creation of the Novo Mercado," Bernardo Rodarte, who oversees 1 billion reais ($315 million) at Sita Corretora in Belo Horizonte, Brazil, said in an interview.

Argentine companies that already meet the criteria include BYMA, Cablevision SA, state-run oil producer YPF SA and Grupo Supervielle SA, said a person familiar with the matter.

"This new index would add value to the Argentine capital market, and it will affect the value of the companies positively, for sure, making them more attractive, " Bull Markets Brokers director Ramiro Marra said from Buenos Aires.

Some Argentine companies are listed in New York and London, where they already have to adhere to higher regulations, said Soledad Aroz, lead specialist in corporate governance at Cefeidas Group.

Marra said the new segment in Argentina should boost company operations by improving management standards.

--With assistance from Carolina Millan

To contact the reporters on this story: Ignacio Olivera Doll in Buenos Aires at ioliveradoll@bloomberg.net, Paula Sambo in Sao Paulo at psambo@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Christiana Sciaudone