MSCI Threatens Turkey's Emerging Market Status Over Stock Scandal

MSCI said Thursday it is immediately freezing certain index-related changes for Turkish equity securities until further notice, threatening to revoke Turkey's emerging market classification over a widening market manipulation scandal. The index provider said it will consider additional measures, including a consultation on reclassifying the MSCI Turkey Indexes to Frontier or Standalone Market status, if sufficient progress is not evident by June 2027.

The freeze means Turkish companies cannot be added to certain MSCI indexes or moved into larger-company indexes, and existing constituents will not receive higher weightings from changes to share counts or free float. MSCI said institutional investors raised serious concerns about possible coordinated trading through fund holdings tied to smaller listed companies, which it said undermines the reliability of free float estimates and market integrity.

The scandal erupted in the fourth quarter of 2025, when allegations emerged that investment management firms were artificially inflating stock prices by piling into small, illiquid listed companies with low free float rates. Turkey's Capital Markets Board later said the investments could not be explained by economic realities or the financial fundamentals of the companies involved.

In September, Pusula Portföy became the first asset manager to report a fund default, and rival Tera Portföy said days later that two of its funds had also defaulted. Turkey's benchmark BIST 100 index plunged 16.7% that month, and the SPK subsequently ordered the liquidation of 131 investment funds overseeing roughly 1 trillion Turkish lira ($20.2 billion) in assets. On Sept. 21, Borsa Istanbul announced dozens of stocks at the center of the scandal would be removed from the BIST 100 at the start of October.

MSCI also moved against Indonesia on Thursday, launching a proposal to reclassify the MSCI Indonesia Indexes to Standalone Market status, effectively downgrading the country from emerging market status. MSCI said market participants had raised significant concerns about the investability of Indonesian equities, including persistent opacity in shareholding structures and suspected coordinated trading behavior, and that an existing freeze on Indonesian securities in MSCI indexes would remain in place.