MSCI Inc.

New York Stock Exchange
Back to all articles
Bullish +65

If included in the MSCI Developed Markets Index, South Korea's equity market could attract $30 billion in passive investment inflows. - 富途牛牛

📅 MSCI is scheduled to announce its annual market classification review results on June 23 regarding South Korea's status.

💰 BNP Paribas Securities estimates a developed market upgrade could trigger approximately USD 30 billion in passive fund inflows.

🇰🇷 South Korea has posted the world's best stock market gains this year but remains classified as an emerging market.

⚖️ MSCI previously removed South Korea from the developed markets watchlist in 2014 due to foreign exchange trading restrictions.

🔄 Recent reforms include reinstating short selling and plans to extend Korean won trading hours starting in July.

🏛️ President Yoon Suk-yeol has placed capital market reform at the core of his policy agenda to achieve an upgrade.

📈 An upgrade would shift the market narrative from a high-growth emerging asset to a core developed market exposure.

📉 Reclassification could help alleviate current passive outflows by raising single-stock holding limits for funds.

🌍 Developed market investors typically prioritize corporate sustainability, governance standards, and shareholder returns over short-term growth.

📉 Upgrading to developed status could gradually improve governance standards in South Korea and reduce market volatility.

Bullish Signals
  • South Korea's stock market has posted the world's best gains this year, demonstrating strong performance despite classification challenges.
  • An upgrade to developed market status is estimated to trigger approximately USD 30 billion in passive fund inflows according to BNP Paribas Securities.
  • The current administration under President Yoon Suk-yeol has explicitly set upgrading from emerging to developed market status as a core policy objective.
  • Recent reforms such as reinstating short selling and plans to extend trading hours address long-standing concerns advocated by global investors.
  • Reclassification would shift the market narrative from a high-growth emerging asset to a core developed market exposure serving as a strategic pillar in global supply chains.
  • Upgrading could raise single-stock holding limits for funds, helping to alleviate current passive outflows by foreign investors.
  • Developed market investors typically have longer investment horizons and emphasize corporate sustainability and governance, which could improve standards over time.
Risk Factors
  • Most investors interviewed by Bloomberg expect MSCI to maintain South Korea's emerging market status because recent reforms still require time to demonstrate their sustainability.
  • Market accessibility issues, specifically foreign exchange trading restrictions and heavy compliance burdens, remain the primary obstacles preventing inclusion on the developed markets watchlist.
  • MSCI previously cited slow progress on foreign exchange reforms as an ongoing concern when reviewing South Korea's market status last year.
Full Analysis
South Korea's equity market, which has recorded the world's best gains this year, is awaiting a pivotal decision from MSCI Inc. regarding its classification status. The global index provider is scheduled to announce the results of its annual market classification review on June 23, determining whether South Korea will be placed on the developed markets watchlist as a precursor to a full upgrade. Despite recent reforms, including the reinstatement of short selling and plans to extend trading hours, most investors interviewed by Bloomberg expect MSCI to maintain South Korea's emerging market status due to concerns over the sustainability of these changes. However, if an upgrade is implemented, BNP Paribas Securities estimates it could trigger approximately USD 30 billion in passive fund inflows and help narrow the persistent valuation discount affecting South Korean equities. Market accessibility issues, specifically foreign exchange trading restrictions and compliance burdens, remain the primary obstacles preventing inclusion on the watchlist. Since being removed from the developed markets watchlist in 2014, Korea has faced ongoing scrutiny over slow progress on reforms. The current administration under President Yoon Suk-yeol has explicitly set upgrading to developed market status as a core policy objective, increasing the likelihood of inclusion. Industry experts highlight that reclassification would shift the market narrative from a high-growth emerging asset to a core developed market exposure serving as a strategic pillar in global supply chains. Furthermore, an upgrade could raise single-stock holding limits for funds and attract investors with longer horizons who prioritize corporate sustainability and governance standards, potentially improving governance and reducing volatility over time.