Morgan Stanley Capital International, Drivers of Capital Flows

21 hours ago 10

February 12, 2026 | 10:00 am

Morgan Stanley. AP/Seth Wenig

TEMPO.CO, Jakarta - More than a decade after it was demoted from developed market status during Europe’s sovereign debt crisis, Greece now appeared poised to reclaim its former standing. Morgan Stanley Capital International (MSCI) opened a consultation on a proposal to reclassify the country from emerging market to developed market, targeting implementation in the August 2026 index review.

Raman Aylur Subramanian, MSCI’s Head of Market Classification and Taxonomy, said that stronger trading liquidity and market-access reforms in recent years had brought Greece more closely in line with developed market standards in Europe. “This makes Greece eligible for consultation for potential reclassification,” he said in an official MSCI statement on Monday, January 26, 2026.

MSCI’s projected change in Greece’s market status was expected to redirect capital flows in the country’s stock market. If reclassified, Greece could see net outflows of about US$0.8 billion in the initial phase of the transition. This would occur as investors focused on emerging markets sell their holdings, while capital owners concentrated on developed markets begin adjusting their portfolios.

Greece’s experience underscored MSCI’s considerable influence over markets, and even over perceptions of a country’s risk profile. Hans Kwee, co-founder of Pasardana, said the institution’s clout stemmed in part from the growing dominance of passive investment funds in global markets. Such funds buy stocks according to index weightings, meaning any change in an index typically triggers swift portfolio adjustments. “When there is a change in index composition or status, capital flows tend to shift as well. The impact is often felt even before the official decision takes effect,” he said.

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