Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Korea's weighting in MSCI index continues to drop amid market weakness
The logo of Morgan Stanley Capital International / Reuters-Yonhap
By Lee Yeon-woo
Korea's share in the Morgan Stanley Capital International (MSCI) Emerging Markets Index has dropped below 9 percent for the first time since the 1998 Asian Financial Crisis, analysts said Sunday.
The decline is largely attributed to prolonged weakness in the country's stock market and a slide in corporate competitiveness, they said.
According to MSCI's official fact sheet, Korea’s weight in the index stood at 8.99 percent as of March 31, down from 9.18 percent in December.
Korea was first added to the MSCI Emerging Markets Index in 1992. By 2004, it climbed to 18.67 percent, becoming the index’s top-weighted country. Until the end of 2020, Korea maintained the second-largest weighting after China. But since December 2023, its share has been in steep decline, surpassed by both Taiwan in 2021 and India in 2022.
As one of the most influential global equity benchmarks, the MSCI Index plays a key role in shaping capital flows.
"If this trend continues, Korea could eventually be grouped with Taiwan as a single portfolio category by global investors. Aside from a few major companies, Korea may find it difficult to attract substantial investment," said Park Yoo-kyung, managing director of emerging markets equities fundamental strategy at APG Investments, during a press meeting on March 28.
Despite the index expanding from 802 to 1,210 constituents between 2011 and 2025, the number of Korean firms included has fallen from 102 to 81.
Analysts point to a combination of the underperformance of the local stock market and waning corporate competitiveness as drivers of the sharp drop. The constituents of the MSCI index are adjusted based on changes in free-float market capitalization.
"This signals a weakening presence of Korea's market and corporations in the global financial landscape," the Asian Corporate Governance Association said in a statement.
"Since the 10 percent weighting is regarded by global institutional investors as a symbolic indicator of a market’s significance, finding a structural remedy to this decline is of critical importance," it added.
March’s notable decline came on the heels of MSCI’s key February review, which saw the removal of 11 Korean stocks without a single addition.
Short-term prospects also remain bleak. Although stocks like Samyang Foods and Hanwha Systems are being considered for inclusion in the upcoming review scheduled for May 14, a substantial rebound in Korea's presence is unlikely.
"The recent announcement of reciprocal tariffs by Donald Trump has heightened volatility in both domestic and global stock markets, increasing uncertainty around index rebalancing," said Yuanta Securities analyst Ko Gyeong-beom. "As with the February review, we may again see a wave of removals without any new additions."