Turkey risks losing its emerging market status if concerns over stock ownership transparency, market access and structural problems in its equity market worsen, S&P Dow Jones Indices has warned.
S&P Dow Jones Indices, one of the world’s major index providers, put Turkey on its watchlist for possible “special measures” or a downgrade toward frontier market status, according to an index announcement on Tuesday.
Turkey is now classified as an emerging market by S&P, a category used for countries whose stock markets are considered developed enough for large international investors but not as advanced as markets such as the United States, Japan or Germany.
A move toward frontier market treatment would mark a warning that Turkish stocks are becoming harder to trust, trade or track under normal global investment rules.
S&P said it is monitoring “market accessibility challenges and structural concerns,” including stock ownership transparency in Turkey, as well as steps taken by Turkish regulators in response.
If the situation worsens, S&P said it could apply special treatment to Turkish securities.
That could mean Turkish stocks would no longer be handled like ordinary emerging market stocks in some S&P indices.
S&P said that if the problems are not resolved within one calendar year after special measures are applied, Turkey’s market classification would be reviewed during the nearest annual review cycle.
The warning follows a similar signal from MSCI, another major index provider whose emerging market benchmarks are watched by global funds.
MSCI said in June that international investors had raised concerns about possible coordinated trading involving fund holdings affiliated with some Turkish companies.
Those concerns included claims that such fund holdings may have inflated free float estimates, meaning some stocks may have looked more publicly traded than they really were, MSCI said.
Free float refers to the shares of a company that are available for public trading.
If the number is inflated, global funds may think a stock is easier to buy and sell than it actually is.
MSCI said Turkey’s Capital Markets Board had introduced a framework to exclude some fund-held stakes from free float calculations when the beneficial ownership, the real control or economic benefit behind shares, belongs to parties that should not be counted as public investors.
But MSCI said investors want to see whether the new rules work in practice.
International investors are also seeking more detailed and timely disclosure of beneficial ownership, stronger surveillance and enforcement against coordinated trading and a clearer process for determining free float, MSCI said.
MSCI warned that if Turkey does not show “tangible and credible progress” by the November 2026 MSCI Index Review, it may launch a consultation on the treatment of Turkey and its eligible securities.
A frontier market label means the stock market is usually smaller, less liquid, less open or less reliable for large international funds than an emerging market.
Turkey’s case is different from many frontier markets as its Istanbul stock exchange is not tiny.
The warning instead points to a credibility problem.
Turkey has sought to draw foreign capital after years of high inflation, currency turmoil and concerns over political pressure on economic institutions.
A loss of emerging market status would damage that effort by putting Turkish equities closer to a lower tier of global markets and could reduce their appeal to funds that follow emerging market benchmarks.