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MSCI warns Argentina, Turkey could soon lose emerging markets status

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A general view of a street linking to 9 de Julio Avenue is seen with cars as Argentina extends the curfew till 24th of May, imposed since 20th of March, in an effort to stem the spread of the coronavirus (COVID-19) pandemic in Buenos Aires, Argentina on May 21, 2020.

Muhammed Emin Canik | Anadolu Agency via Getty Images

One of the world’s largest benchmark index providers has warned Argentina and Turkey could soon be removed from the MSCI Emerging Markets Index should it become increasingly difficult for foreign investors to access their respective equity markets.

“While volatility increased dramatically due to the Covid-19 pandemic, global equity markets remained accessible and continued to function well, allowing issuers to raise capital and investors to manage risk during the crisis,” Dimitris Melas, global head of equity research and chairman of the MSCI Index Policy Committee, said in a statement on Tuesday.

However, two important emerging markets, Argentina and Turkey, “suffered substantial deterioration” in market accessibility over the last 12 months, Melas continued. “That could lead to their exclusion from the MSCI Emerging Markets Index.”

The MSCI Emerging Markets index is a benchmark used by many global funds and exchange-traded funds. It captures large and mid-cap representation across more than two dozen countries and is often used as a measure of equity performance in global emerging markets.

The warning comes shortly after talks between Argentina’s government and international creditors to restructure $65 billion in debt hit a roadblock, leaving a deal hanging in the balance.

How did we get here?

Argentina tumbled into its ninth sovereign debt default on May 22 after it missed overdue interest payments.

The South American country also imposed stringent capital controls in September last year, following a historic stock market crash that led to a surge in foreign currency demand.

The MSCI, in its annual market classification review, said these capital controls were “making it impossible” for international investors to access the domestic equity market.

A view of Exchange house in Buenos Aires, Argentina. Argentina Peso weakened substantially after Primary Presidential Elections.

Federico Rotter | NurPhoto | Getty Images

“The Argentinian authorities must realize that the prolonged application of capital controls or the introduction of further capital controls may force the reclassification of the MSCI Argentina Indexes from Emerging Markets status to either Frontier Markets or Standalone Markets status,” Sebastien Lieblich, global head of index solutions and chairman of the MSCI Equity Index Committee, said in a statement.

The MSCI said it would continue to consult with market participants on the classification of the MSCI Argentina Indexes as part of the index provider’s 2021 review.

However, any event that results in further deterioration of market accessibility would prompt the MSCI to remove the MSCI Argentina Indexes from the emerging markets index “as soon as practicable.”

What about Turkey?

The MSCI announced it is considering whether to launch a consultation on a reclassification proposal for the MSCI Turkey Index to Frontier Markets or Standalone Markets status “if the already deteriorating accessibility level of the Turkish equity market were to worsen further.”

The group said the accessibility level of the Turkish equity market had been “adversely impacted” by the introduction of short-selling and stock lending bans in October 2019 and February 2020, respectively.

People wear face masks as they walk down the Istiklal avenue on April 14, 2020 in Istanbul a day after Turkish President ordered a fresh lockdown next weekend, warning the move would be imposed as long as necessary to stop the spread of the COVID-19 disease caused by the novel coronavirus.

Ozan KOSE | AFP | Getty Images

MSCI also said it was reclassifying the Iceland index to Frontier Markets from Standalone Markets following the country’s decision to remove capital controls last year. This has made it easier for investors to access Iceland’s equity market, the group added.

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Germany’s sex workers protest to go back to work amid coronavirus ban

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Prostitutes in Germany are demanding the right to get back to work as the country’s brothels remain closed due to the coronavirus pandemic.

Approximately 400 prostitutes and brothel operators from across Germany demonstrated in the red light district of Hamburg on Saturday, Germany news agency Deutsche Welle reported Sunday

Prostitution is legal and regulated in Germany but the country’s brothels have been closed for almost four months due to the outbreak.

Now, sex workers say they are being treated unfairly and are demanding the right to return to work, especially as other businesses where close contact is permitted, such as hair salons and tattoo parlors, have reopened.

The protest was organized by the Association of Sex Workers with the group warning that the closure of licensed venues had forced some prostitutes onto the streets, putting them in danger both in terms of their health and personal safety.

Ahead of the protest on Herbertstrasse, a street in the district of St. Pauli in Hamburg and the only street in the city’s “red light district” where sex workers occupy windows, similar to Amsterdam’s red light district, the association posted a statement on its website calling for sex workers to be able to work again.

“Prostitutes stand up and ask the politicians to open the brothels,” the association said. “While around the infamous Herbertstrasse in Hamburg/St. Pauli, normal life returns after the coronavirus lockdown, shops, hotels, bars and restaurants have reopened, tourists are guided through the world-famous neighborhood, the windows in Herbertstrasse remain dark (and there is) no life, no business, no joy. Nothing is going on.”

The statement added that “prostitutes are upset” at the continuing ban on sex work, and are concerned for their livelihoods.

“They have met all government requirements, paid taxes, received little corona support, stand with their backs to the wall and are tired of the fact that politics is not taking action.”

The group argues that prostitution does not pose a higher risk of infection than other body-related services, such as massages, cosmetics, dancing and contact sports and that hygiene “has always been part of business for prostitutes.” The group added that workers are prepared to implement more protective measures, such as partitions in the windows, ventilation and the recording of customer contact data. 

The group has questioned whether it is proportionate to keep Germany’s brothels closed given the country’s falling number of coronavirus infections. Like its European counterparts, Germany has seen a high number of coronavirus cases (with nearly 200,000 cases to date) but unlike its neighbors, it has kept the death toll low with 9,071 fatalities so far. Germany has attributed its low death toll to several factors, including a robust contact-tracing system and modern hospital infrastructure.

There are estimated to be around 400,000 sex workers in Germany, although no official data is recorded. The Association of Sex Workers cited members that feel humiliated having to turn to the state for financial support, and also those that insist they can offer their services in a safe way. One worker, Anna, was quoted as saying that partitions had been set up in the windows of Herbertstrasse.

“Mouth-nose masks are already there. We went through everything carefully: we can also offer sexual services under coronavirus protective measures. We find it insulting and incapacitating if we are not trusted,” she said.

The association said that sex workers in Belgium, Switzerland, the Netherlands, Austria and the Czech Republic had been allowed to return to work since the beginning of June.

In Amsterdam, where Europe’s most well-known Red Light District is located, sex workers were allowed to return to work last month after the government brought forward an initial return to work date of September 1.

Red Light United, a group representing sex workers’ interests in the Netherlands, said that the ban on sex work during the coronavirus crisis had forced many women with little or no financial buffers into illegal work. 

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Trump advisor Navarro calls TikTok CEO Kevin Mayer an ‘American puppet’

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A TikTok logo seen displayed on a smartphone with Chinese flag on the background.

Omar Marques | SOPA Images | LightRocket via Getty Images

White House trade advisor Peter Navarro dubbed TikTok’s new CEO Kevin Mayer, an “American puppet” for working at the Chinese-owned social media app, in an interview with Fox Business on Sunday.

Navarro also used the interview to double down on accusations that Chinese apps are gathering data on Americans and handing that over to Beijing. He also said to expect “strong action” from President Donald Trump on TikTok and other Chinese apps.

TikTok has been in the cross-hairs of Washington for some months. But pressure on TikTok, which is owned by Beijing-based Bytedance, rose last week when Secretary of State Mike Pompeo said the government is “looking at” banning the viral app.  

We have never shared TikTok user data with the Chinese government, and would not do so if asked. Period.

The Trump administration maintains that TikTok and other Chinese apps gather lots of data from American users and send that back to China, accusations repeated by Navarro. 

“What the American people have to understand is all the data that goes into those mobile apps that kids have so much fun with and seem so convenient, it goes right to servers in China, right to the Chinese military, the Chinese Communist Party, and the agencies that want to steal our intellectual property,” Navarro told Fox.

“Those apps can be used to steal personal and financial information for blackmail and extortion, they can be used to steal business intellectual property and proprietary secrets.” 

The Ministry of Industry and Information Technology was not immediately available for comment when contacted by CNBC.

Navarro also mentioned WeChat, China’s largest messaging app which is owned by technology giant Tencent

“TikTok and WeChat are the biggest forms of censorship on the Chinese mainland, and so expect strong action on that,” he alleged. 

TikTok does not operate within mainland China. Instead, ByteDance runs a very similar product called Douyin.

After mentioning that India banned several Chinese apps, Navarro said: “TikTok, WeChat, I suspect the president is just getting started with those two,” without elaborating if that meant a ban was coming. 

In response to Navarro’s comments, a TikTok spokesperson said protecting the privacy of its users’ data is a “critical priority.” 

“Our Chief Information Security Officer has decades of industry and US law enforcement experience. TikTok’s parent is a privately owned company backed by some the best-known US investors, which hold four of its five board seats,” a TIkTok spokesperson told CNBC. 

“TikTok is enjoyed by users throughout the world, but the app is not even available in China. As we have said repeatedly, we have never shared TikTok user data with the Chinese government, and would not do so if asked. Period.”

Tencent declined to comment. 

TikTok has faced accusations of censorship in the past but has denied that it removes “content based on sensitivities around China or other governments.” In regards to privacy, TikTok has previously said that U.S. user data is stored in the United States, with a backup in Singapore. The app also said that it has “never provided user data to the Chinese government” nor would it do so if asked. 

Meanwhile, services operating on the Chinese mainland, including WeChat, regularly censors posts and messages that are deemed sensitive to the Chinese government. 

TikTok CEO an ‘American puppet’

For its part, TikTok has been trying to distance itself from its Chinese parent company. 

ByteDance hired former Disney executive, Kevin Mayer, to be TikTok’s CEO earlier this year. His priority was seen as rebuilding trust with regulators

But Navarro criticized the hire, calling Mayer an “American puppet” and saying that the strategy of putting a U.S. citizen in charge is “not going to work.” 

TikTok was not immediately available for comment specifically on the remarks regarding Mayer. 

The White House trade advisor also said that any plans to spin-off TikTok into an American company would also not be beneficial to the U.S.

“If TikTok, if it separates as an American company, that doesn’t help us because … we’re going to have to give China billions of dollars for the privilege of having TikTok operate on U.S. soil,” Navarro said. 

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Poland’s incumbent Duda wins presidential election

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Andrzej Duda (R), the current Polish President and candidate for the presidential election 2020, accompanied by wife Agata (C) and daughter Kinga (L), seen on the final day of Duda’s presidential campaign, in Rzeszow.
On Friday, July 10, 2020, in Rzeszow, Podkarpackie Voivodeship, Poland. (Photo by Artur Widak/NurPhoto via Getty Images)

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Poland’s incumbent Andrzej Duda has won the presidential election, results from over 99% of polling stations show, with remaining uncounted votes unlikely to sway the final outcome, the National Electoral Commission said on Monday.

Duda, an ally of Poland’s ruling nationalists, is expected to help the Law and Justice (PiS) party continue its reforms of the judiciary, which have been criticised by the European Union, and generous social spending programs.

According to the latest results, Duda received 51.21% of the vote, while opposition candidate Rafal Trzaskowski got 48.79% of the vote. The difference in votes between the candidates amounted to around 500,000. 

“I don’t want to speak on behalf of the campaign staff, but I think that this difference is large enough that we have to
accept the result,” Grzegorz Schetyna, the former head of Poland’s opposition Civic Platform (PO) grouping and member of parliament told private broadcaster TVN24 on Monday. 

Poles voted with almost record turnout, reported at 68.12% by the commission. The Commission said it wasn’t sure when it would announce full official results as some polling stations, including some abroad, had not yet submitted their official counts.

The opposition had earlier said it was collecting information about what it says were voting irregularities. “We are gathering information and signals about different irregularities and we are still only talking about polls and only a percentage of results from the National Electoral Commission so we don’t have a full picture of the situation,”
Tomasz Siemoniak, a PO member of parliament told Reuters. 

PiS officials did not immediately respond to requests for comment. The foreign ministry was also unavailable for comment. “Today or perhaps at the latest tomorrow…we will be able to indicate what the scale of these protests is,” Sylwester Marciniak, the head of the electoral commission, told a news conference on Monday.

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