South Korea to Continue Push for Developed Market Status in MSCI Index
Quick Look
South Korea will persist in its efforts to be reclassified as a developed market by MSCI, despite the index provider's decision to maintain its emerging market status due to limited Korean won convertibility and onshore liquidity issues.
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Why It Matters
South Korea has been seeking reclassification from the emerging market to the developed market category under the MSCI index. MSCI cited limited convertibility of the Korean won and insufficient onshore liquidity as key barriers.
By Kang Yoon-seung
SEOUL, June 24 (Yonhap) --South Korea will continue its push for inclusion in the developed-market category under the Morgan Stanley Capital International (MSCI) index after the provider decided to keep Asia's No. 4 economy in the emerging-market category, the finance ministry said Wednesday.
Overnight, MSCI said South Korea will remain in the emerging-market category despite Seoul's efforts to gain inclusion in the developed-market category, citing limited convertibility of the Korean won in the offshore currency market.
"If we continue to implement reforms in the foreign exchange and capital markets on our own schedule, we believe we can be included among advanced economies," the Ministry of Finance and Economy said in a statement.
The finance ministry added that the country will continue efforts to communicate with major overseas investors and reflect their feedback in its policies.
"MSCI acknowledges the measures announced by Korean market authorities to address these long-standing concerns," the finance company said. "However, investors have communicated that the underlying issues have not been fully resolved."
MSCI, meanwhile, noted the limited convertibility of the Korean won in the offshore currency market as a key barrier to reclassification.
"Even more concerning, onshore liquidity during the extended FX trading hours remains largely insufficient to support tight execution at standards comparable to those observed in developed markets, constraining FX operational flexibility for index replicators and others."
Open Questions
- When might South Korea achieve developed market status?
- What specific reforms are needed for full convertibility?
