The periodic review of the MSCI Index is one of the most influential events in global capital markets, as changes in index composition trigger portfolio rebalancing by institutional and passive investors. These adjustments can generate significant changes in stock prices and trading activity, particularly in emerging markets. This study investigates how the August 2025 MSCI Semi-Annual Index Review affected stock market reactions in Indonesia and Malaysia through an event study approach. The analysis covers 57 publicly listed companies, 28 from Indonesia and 29 from Malaysia, over a 21-day event window surrounding the announcement. Using the market-adjusted model, the study estimates abnormal returns, cumulative average abnormal returns (CAAR), and trading volume activity (TVA). Statistical analyses, including t-tests, Wilcoxon tests, Mann–Whitney U tests, and ordinary least squares regression, are employed to evaluate differences in market responses across the two countries. The findings reveal that the announcement did not generate significant abnormal returns on the event day, suggesting that the market did not react immediately to the information. However, a significant increase in trading volume of approximately 16% was observed following the announcement, reflecting portfolio rebalancing by index-tracking funds. Price adjustments occurred gradually after the announcement, with Malaysian stocks experiencing a stronger and more concentrated negative cumulative abnormal return than Indonesian stocks, where the response was more muted and dispersed. These results indicate that although both markets respond to MSCI index revisions, they absorb information at different speeds. The study provides valuable insights for investors, portfolio managers, and policymakers regarding market efficiency and the short-term effects of index rebalancing in emerging capital markets.