MSCI keeps South Korea as emerging market, delays Indonesia review amid downgrade risk
SEOUL, SOUTH KOREA – DECEMBER 09: People pass by the Korea Stock Exchange (KRX) building as stock exchanges across Asia are affected by intensifying political turmoil over chairman Yoon Suk Yeol’s role in martial law on December 9, 2024 in Seoul, South Korea. Korea Composite Stock Price Index (KOSPI), Hong Kong Heng Sang, Shanghai Composite index and stocks. Countries such as Australia, China, India and Thailand saw a decline in their indexes due to the impact of the political crisis in South Korea and Syria. (Photo: Daniel Ceng/Anadolu via Getty Images)
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Index provider MSCI classifies South Korea as an “emerging market” in its latest report review On Tuesday, he extended his review of Indonesia’s status until November.
The decision dashed hopes that Seoul could be included on MSCI’s Developed Markets watch list; this was a crucial step before a market could be upgraded to developed market status.
The expanded review for Indonesia comes after MSCI expressed concerns about market accessibility earlier this year and froze the country’s stocks from indices in January, citing investability concerns.
MSCI said it would continue to evaluate reforms introduced by Indonesian authorities, but if these measures prove inadequate the index provider would “consider a range of options for appropriate treatment for the Indonesian market”, including a potential downgrade to frontier market status.
korea discount
In the case of South Korea, MSCI said the limited convertibility of the Korean won in offshore foreign exchange markets remains a significant obstacle to reclassification.
The index provider also cited restrictions on investment products due to a strict investor identification system, restrictions on in-kind transfers and off-exchange transactions, and restrictions on the use of stock market data.
While MSCI acknowledged the measures announced by South Korean officials to address these concerns, “investors have communicated that the underlying issues have not been fully resolved,” it said.
The country is preparing for the launch 24 hour trading The dollar-won spot market on July 6 is the final step in opening the foreign exchange market to overseas investors.
Seoul has long aimed to be included in MSCI’s Developed Markets category. Analysts previously told CNBC that an upgrade could help resolve the “Korea discount,” a term used to describe the lower valuations often given to South Korean stocks compared to their global peers.
South Korea’s Ministry of Finance said it would continue to pursue reforms aimed at securing the upgrade.
The Ministry said, “We believe that if we continue to implement reforms in foreign exchange and capital markets according to our own program, we can be among the developed economies.” he said. According to Yonhap.
This is an evolving story; Please check back for updates.
