Login to the Sina Finance APP and search for [Disclosure] to access more rating levels. From October 20-22, along the banks of Shanghai's Huangpu River, the 2026 Sustainable Global Leaders Conference will return. Nobel Prize and Turing Award winners will speak on-site about the future and trends of technology, and there will also be a dialogue between the internet-famous professors who "rescue" people from anxiety and the era of involution — Macfarlane and Xiang Biao! Limited spots available, first come first served. Let us embark together on the journey of sustainability! [Click to register]
Key Points
On October 15, MSCI Inc (MSCI) froze certain index adjustment matters for Turkish stocks on the grounds that the reliability of free-float shares was questionable and market integrity had been compromised.
MSCI Inc stated that if no substantive improvement is seen by June 2027, it may initiate a consultation process and consider downgrading Turkey from emerging market to frontier market or standalone market classification.
Turkish regulators, following multiple fund redemption defaults and turbulence in low-liquidity stock markets, have ordered the liquidation of 131 funds across seven asset management institutions.
The Suleymaniye Mosque on the Istanbul city skyline.
A market manipulation scandal continues to batter the Turkish market, placing the country's emerging market status at risk and exposing local listed companies to the danger of being shut out of global indexes.
Since the fourth quarter of 2025, numerous allegations have emerged in the market: multiple investment management institutions aggressively bought small-cap, low-liquidity listed companies with low free-float ratios, artificially driving up share prices.
Turkey's Capital Markets Board (SPK) subsequently stated that the investment behavior in these stocks "cannot be explained by the economic realities and financial fundamentals of the relevant companies."
In September, Pysula Portfolio became the first asset management institution to report a fund default; shortly after, its competitor Terra Portfolio stated that two of its funds had also defaulted.
Turkey's benchmark BIST-100 index plunged 16.7% in September alone. A large number of investment funds suffered massive losses while facing enormous redemption pressure, prompting the SPK to intervene and order the liquidation of 131 investment funds. These funds pending liquidation had combined assets under management of approximately 1 trillion Turkish lira (equivalent to $20.2 billion).
On September 21, Borsa Istanbul issued an announcement that dozens of stocks deeply mired in the scandal would be removed from the BIST-100 index in early October.
On Thursday, index provider MSCI Inc, affected by the scandal, issued a threat to revoke Turkey's emerging market status.
MSCI Inc announced that, effective immediately, certain index-related adjustments for Turkish securities would be frozen until further notice.
MSCI Inc stated in its announcement: "In the MSCI Inc 2026 Annual Market Classification Review, institutional investors raised significant concerns: certain fund holdings deeply connected to small listed companies are suspected of coordinated trading, which undermines the reliability of free-float estimates and damages market integrity."
"MSCI Inc expects to see credible and concrete progress, including detailed and timely disclosure of beneficial ownership, robust monitoring and enforcement mechanisms against coordinated trading, and a transparent, rules-based framework for identifying and addressing securities whose free-float structures have been artificially distorted."
The freeze on stock index adjustments means: Turkish companies will be unable to be included in certain MSCI Inc indexes, nor can they be upgraded into larger market-cap tier indexes; existing constituent stocks will also not receive higher index weights due to changes in share capital or changes in the proportion of foreign-investable shares.
MSCI Inc added on Thursday: "If sufficient improvement is not seen by June 2027, MSCI Inc will consider additional measures, including initiating a consultation to assess reclassifying the MSCI Inc Turkey Index from emerging market to frontier market or standalone market."
Indonesia Also Faces Risk of Being Removed from Emerging Market Index
Turkey was not the only country MSCI Inc warned about on Thursday. The index provider also proposed adjusting the MSCI Inc Indonesia Index to "standalone market," effectively downgrading Indonesia from emerging market status.
MSCI Inc said it received feedback from market participants in June expressing significant concerns about the investability of the Indonesian stock market. Issues included "persistent opacity in equity structures and suspected coordinated trading behavior."
MSCI Inc stated: "Although Indonesian regulators have announced multiple reforms: strengthening disclosure of shareholders holding more than 1%, more granular investor classification disclosure, a High Shareholding Concentration (HSC) reporting system, and a roadmap for a 15% minimum free float; institutional investors emphasized that reforms need to be continuously implemented and that tangible, sustained policy effects must be seen."
"Market participants have fed back to MSCI Inc that, to date, the Indonesian stock market has not yet demonstrated sufficient progress in a stable manner. Although reform plans have been introduced, significant risks of market failure remain, suspicions of coordinated trading persist, and there is a lack of evidence of substantive enforcement being carried out."
MSCI Inc stated that index freeze measures for Indonesian securities will continue to be maintained until further notice.
Comments