The main Korea Composite Stock Price Index is seen at the closing bell on a screen in a trading room of a Hana Bank branch in central Seoul on June 22, 2023. (Yonhap)
SEOUL, June 24 (Korea Bizwire) — South Korea’s stock market has failed to win developed market status from global index provider Morgan Stanley Capital International (MSCI), despite a set of market reform measures earlier this year.
The MSCI announced the decision in a press release released Thursday (U.S. time), saying South Korea will stay on the emerging market list for now.
The country has to wait until June next year to try again for the MSCI’s watch list of developed market status.
Every year in June, the MSCI reclassifies its watch list of emerging markets and developed markets, based on the countries’ economic development; size and liquidity of equity markets; and market accessibility for foreign investors.
The MSCI said it welcomes the South Korean government’s proposed measures aimed at improving the accessibility of the equity market, but for the MSCI to consider potential reclassification of the country’s market status, it must implement the measures first and international investors should experience over time the reforms in practice.
In February, the government unveiled its plan to improve the country’s foreign exchange (FX) market structure, including measures to allow foreign institutions to participate in the onshore interbank FX market upon registration, extend trading hours and implement specific enhancements in infrastructure that aim to better align with global FX markets.
The measures will go into effect in the second half of 2024.
The Financial Services Commission has also announced that KOSPI-listed companies with assets of 10 trillion won (US$7.7 billion) or more will be mandated to offer English disclosures from next year, and the requirement will be expanded to firms with assets of 2 trillion won or more from 2026.
In a market accessibility report released earlier this month, the MSCI said South Korea needs to show improvements in six out of 18 categories — FX market liberalization level, investor registration and account set up, information flow in market organization, clearing and settlement in market infrastructure, transferability in market infrastructure and the availability of investment instruments.
The MSCI also noted it considered advancing South Korea from an emerging to a developed market between 2009 and 2014, but market participants cited the limited convertibility of the Korean won in the offshore currency market, the rigidity of the identification system and the lack of availability of investment instruments as important concerns.
It pointed out Seoul’s upcoming planned reforms do not address the issues related to the restrictions imposed by the local stock exchange on the use of exchange data for the creation of financial products.
(Yonhap)
