MSCI Threatens Market Downgrades for Indonesia and Turkey

Financial index provider MSCI Inc. has initiated actions that could downgrade the market status of both Indonesia and Turkey due to concerns over market integrity and investability. In Indonesia, the company launched a consultation on a proposal to reclassify the MSCI Indonesia Indexes from Emerging Market to Standalone Market status. This move follows reports of suspected coordinated trading and opaque shareholding structures. While the Government of Indonesia announced reforms regarding shareholder disclosure and a 15% minimum free float roadmap, MSCI stated that sufficient progress has not been consistently observed.

Simultaneously, MSCI implemented an immediate freeze on index-related changes for Turkish equity securities, suspending additions to the MSCI Turkey Investable Market Index and increases to Foreign Inclusion Factors. The company cited institutional investor concerns regarding coordinated trading through fund holdings affiliated with small listed companies, which it claims undermines the reliability of free float estimates. Although the Government of Turkey introduced a framework to exclude certain fund-held stakes from free float calculations, MSCI is maintaining the freeze to assess the effectiveness of these measures.

MSCI will accept feedback on the Indonesian proposal until April 30, 2027, with a final decision expected by June 30, 2027. For Turkey, the company will monitor enforcement and may reclassify the MSCI Turkey Indexes to Frontier or Standalone Market status if sufficient progress is not evident by June 2027.