| MSCI Inc. kept South Korea in its emerging-market index and refrained from starting a formal review process that could eventually elevate the $5 trillion stock market to developed-market status. In its annual market-classification review, the New York-based index provider said that South Korea will remain in the emerging market category, according to a statement released Tuesday. The release acknowledged measures announced by Korean authorities to improve the long-standing market accessibility issues, but said key structural bottlenecks have yet to be fully resolved. The Korean won's "onshore liquidity during the extended FX trading hours remains largely insufficient to support tight execution at standards comparable to those observed in developed markets, MSCI said in the statement. That constrains FX operational flexibility for index replicators and others, it added. ALSO READ: Asian Markets Today: Kospi Rebounds, Nikkei Slips as Investors Assess Tech Recovery The widely expected decision came after MSCI highlighted lingering market-accessibility issues last week, dampening hopes that the world's best-performing stock market this year could begin the process of joining the ranks of developed markets - which offer greater accessibility, liquidity and operational efficiency for global investors. The South Korean government expects the inclusion in the MSCI developed-market index to follow naturally if Seoul continues to pursue reforms, the finance ministry and Financial Services Commission said in a joint statement. Seoul will activate regular communication channels with major overseas investors to review the practical use of the reform measures and incorporate feedback from market participants, it added. "Inclusion to the watch list requires not only the implementation of relevant reforms but also verification of their sustainability," said Kim Kyoujin, an analyst at NH Investment & Securities. Kim expects South Korea to join the watch list in 2027 and be included in the developed-market league in 2029. An eventual entry into the league of the deepest pool of capital markets with unrestricted flow and ease of forex transactions would help South Korea to attract more global funds, analysts say. Last week, MSCI said South Korea continues to face several market-access hurdles, including the absence of a fully deliverable offshore won market and lingering operational frictions in short-selling settlements. The index provider also cited inefficiencies related to investor registration and insufficient English-language disclosure of detailed market information. MSCI removed Korea from its developed-market watchlist in 2014, citing restrictions on currency trading and other market-access issues. Read more: Korean Stocks Tumble 10% as Extreme Volatility Rattles Investors Since then, Korea has resumed short selling in 2025 after a more than one year ban on the practice and is preparing to launch extended won trading hours in July. President Lee Jae Myung has also made capital-market reform a key policy priority. The Kospi has become the world's best-performing major equity benchmark this year as investors piled into artificial-intelligence winners. The rally, largely driven by two chipmakers, also turned Korea into one of the world's most volatile stock markets - the index slumped 10% on Tuesday, with foreign investors offloading more than $2.5 billion of Kospi shares. |
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