BUENOS AIRES, June 25 (Reuters) - Argentina's S&P Merval stock index closed down some 2.7% on Friday after MSCI yanked the country's emerging market status and reclassified it a "standalone" market over continued tough capital controls limiting accessibility for investors.

Index provider MSCI said on Thursday it would reclassify the MSCI Argentina Index from Emerging Markets to Standalone Markets status during its November index review, due to the "prolonged severity of capital controls with no resolution."

Indices can funnel billions of dollars of tracking funds into developing economies. A status downgrade can spark forced selling by funds, hitting locally listed companies hard.

The Merval index, which has climbed sharply since April, dropped a maximum 5.74% before slightly rebounding. Among the biggest drops were local-listed shares of state oil company YPF and financial firm Grupo Supervielle.

U.S.-listed shares of Argentine IT services firm slipped in early trading, but recovered to end only marginally down for the day. MetroGAS SA was down around 6%.

Some analysts pointed out that the downgrade was already partially baked into prices given the country has been warned before and capital controls have now been in place since 2019.

"Stock prices are already discounting a very punished market and with a lot of bad news on top of it, so this novelty of going to 'Standalone' isn't a very strong change in market sentiment", said consultancy Portfolio Personal Inversiones.

"Beyond the movement we're seeing currently with the noise of this news, the market trend will be guided by the (midterm)elections, negotiations with the IMF and Paris Club, and the economic plan for the coming years," it added.

Argentina this week struck a deal with the Paris Club group of country lenders to defer $2 billion in payments until March next year, gaining some breathing room in larger debt talks with the International Monetary Fund. (Reporting by Walter Bianchi and Jorge Otaola; Writing by Adam Jourdan; editing by Jonathan Oatis and Marguerita Choy)