Downgraded by MSCI to Standalone Status, This Stock Exchange Stages a Comeback
Jakarta, CNBC Indonesia — The Bulgarian Stock Exchange (BSE) has improved its standing with global index provider Morgan Stanley Capital International (MSCI). After being downgraded from Frontier Market to Standalone Market, Bulgaria has now been upgraded back to Frontier Market.
How did this happen?
The downgrade dates back to August 2016, when MSCI made the decision because the size and liquidity of Bulgaria’s stock market had continued to decline.
The reclassification took place in June, but is scheduled to be implemented at the May 2027 index review.
“This is a historic moment for Bulgaria’s capital market,” Bulgarian Stock Exchange chief executive Manyu Moravenov said at the time, referring to MSCI’s announcement, as reported by the Bulgarian News Agency.
“MSCI’s decision sends a clear signal to the international investment community that Bulgaria is becoming an increasingly attractive investment destination, and that reforms and efforts to develop the market are bearing fruit,” he said.
“The reclassification could increase the international visibility of Bulgarian listed companies, attract new investors and create additional opportunities for businesses to raise capital,” he added.
The upgrade illustrates how a stock market can rejoin a category that is more integrated with international investors, provided it improves its liquidity and accessibility.
MSCI said the proposal to upgrade Bulgaria was first put to consultation in 2024. At the time, several Bulgarian shares met the size and liquidity requirements for Frontier Market status.
However, the decision was postponed after international institutional investors raised concerns about limited market liquidity and the time needed to adopt the euro. Since then, conditions in Bulgaria’s stock market have been judged to have improved significantly.
MSCI said market participants agreed that liquidity on the BSE had increased substantially. The improvement was supported by a rise in the number of shares meeting Frontier Market size and liquidity requirements, as well as higher trading values on the exchange.
Bulgaria’s transition to the euro also proceeded without significant operational difficulties. The country officially adopted the euro on 1 January 2026.
As part of the change, the BSE’s trading and settlement infrastructure shifted entirely to euro denomination. Bulgaria had previously, in September 2023, migrated to the European Central Bank’s securities settlement platform, TARGET2-Securities (T2S).
Not an instant process
The process was not immediate. It involved consultations, a delay in the decision and improvements in market conditions before MSCI ultimately decided to upgrade the classification.
MSCI said a market’s classification is determined by the level of accessibility and investment suitability actually experienced by international institutional investors. Its indices and market classifications, it said, are not permanent assessments.
MSCI can act when market access and investor experience deteriorate. Conversely, a market can be upgraded if its accessibility and investment suitability improve substantially and sustainably.
“Market status must be continually assessed in light of changing market conditions and the experience of international investors,” the head of MSCI’s Market Classification and Taxonomy said in the announcement concerning the BSE.
“When market access or the investor experience deteriorates, MSCI needs to take action. Conversely, a market can receive an improved classification if its accessibility and investment suitability improve significantly and sustainably,” the official said.