Investment: Price gains of 1000 percent: Turkey risks descent from emerging markets index - fund managers demand harsher penalties

Turkey is at risk of being excluded from the emerging market indexes of MSCI and S&P Dow Jones. The reason is extreme price movements in individual stocks, which the index providers view as a sign of a lack of market transparency. Turkish investment funds are now urging the capital market regulator SPK to take tougher action against market manipulation.

Five fund managers, who manage some of the country's largest investment funds, told Bloomberg News they are advocating for tougher measures than the SPK has proposed so far. These include stricter penalties and restrictions on hedge fund activities in certain financial instruments. Some of these proposals have already been discussed in talks with the regulator, the finance ministry, and other government agencies, they said.

The SPK has not responded to the feedback so far. The authority had sent draft reforms to investors in February and declined to comment to Bloomberg.

Some stocks - especially small and illiquid ones - saw their quotes rise by more than 1,000 percent in the past few years. Some high-yielding funds have gained large followings among private investors. Although the BIST 100 benchmark index was one of the strongest stock market indices worldwide in the first half of 2026, most of the gains are due to price increases in a handful of stocks.

Without more transparency in shareholder structures, Turkey could be excluded from the emerging market benchmarks. The country would then be classified as a so-called Frontier Market - a category below emerging markets, which attracts significantly less international capital. The total market value of the companies included in the MSCI emerging market index is $29.4 trillion; the Frontier Markets Index has around $700 billion - a ratio of more than 40 to one.

"Obvious manipulation"

The SPK must take action against the "obvious manipulation that is currently taking place," demanded Murat Gulkan, CEO of OMG Capital Advisors. "The overriding responsibility of the regulator is to maintain public trust in the financial system," he said in a phone interview. Another Istanbul investor, who wanted to remain anonymous, expressed concern about the persistently high fund returns due to allegedly manipulated stock prices, which are attracting thousands of additional investors into these funds.

At meetings between foreign investors and Finance Minister Mehmet Şimşek last month, coordinated trading was also on the agenda, said people familiar with the talks. The finance ministry declined to comment.

SPK imposed almost 60 fines

Under its new chairman Mahmut Sutcu, the SPK has imposed fines on almost 60 individuals and institutional investors since May. Around 20 investors have been banned from trading or had their licenses revoked, and dozens more are under investigation. In addition, the SPK has revised the calculation of free float, after MSCI removed some Turkish stocks from its index. However, a comprehensive reform is still lacking, said the fund managers.

The proposals include a cap on how much hedge funds can invest in stocks of related companies - currently, such limits do not exist. Gulkan calls for a complete ban on such purchases and warns: "The conflicts of interest are just as pronounced in the bond and credit sectors. If regulation only targets stocks, it will be ridiculously easy to construct structured products that economically correspond to direct stock ownership."

Tougher sanctions are also needed, said the other Istanbul fund manager. The penalties for stock manipulation must be so high that it is not worth attempting.