Turkey could be shunned by top financial index provider
A top global index provider has raised questions over whether Turkey can retain its emerging market status after Ankara imposed curbs on certain financial instruments.
MSCI, a international index provider, said it may lower the status of Turkey’s share index to a “frontier market” due to bans on short selling and stock lending since October 2019 and February 2020, respectively.
That would mean the loss of major investment by international pension funds and other institutional investors that use MSCI indexes to deploy their capital. Frontier markets are seen to carry more investor risk.
“In the last 12 months, two imporon emerging markets, Argentina and Turkey, suffered substantial deterioration in market accessibility that could lead to their exclusion from the MSCI Emerging Markets Index,” said Dimitris Melas, global head of equity research and chairman of the MSCI Index Policy Committee.
The introduction of short selling and stock lending prohibitions are seen as a restriction on the capability of investors to express their active investment opinions and hedge portfolio risk.
Experts think that this new warning should be taken as a sign of the unease of foreign investment in the country. “The MSCI is issuing a warning to Turkey and would like it to reverse the restrictions imposed short selling and stock lending. The Turkish authorities would be wise to heed this warning and ease these restrictions,” Nigel Rendell, director for Europe, the Middle East and Africa at New York-based Medley Global Advisers, told Arab News.