MSCI warns Turkey: Status downgrade if no progress by June 2027

MSCI froze certain index changes related to Turkish equities on October 15 pending a second announcement, according to Cumhuriyet Gazette. The global index provider announced that if sufficient progress is not made in market transparency and oversight by June 2027, it may initiate a consultation process to downgrade Turkey from Emerging Market status to Frontier Market or Standalone Market status.

Since MSCI's initial serious warnings, a wave of foreign selling on Borsa Istanbul has created a 21 percent loss in value. Company valuations have fallen back to Covid-19 era levels. Under the freeze decision, certain increases in public float factors and share counts, additions of new companies to indices, and transitions to upper size segments have been suspended.

MSCI's decision coincided with a period when the effects of the fund crisis continued to weigh on the stock exchange. Turkey's current market status has not yet undergone any official change; however, the behavior of foreign investors continues to maintain pressure on the market. Turkey was admitted to Emerging Market status in 2013; a potential downgrade could accelerate foreign fund outflows.