Seoul to continue push for MSCI developed market status bid after remaining in emerging category

Company buildings in Yeouido / Korea Times file

South Korea will continue its push for inclusion in the developed-market category under the Morgan Stanley Capital International (MSCI) index after the provider decided to keep Asia's No. 4 economy in the emerging-market category, the finance ministry said Wednesday.

Overnight, MSCI said South Korea will remain in the emerging-market category despite Seoul's efforts to be placed on the watch list for inclusion in the developed-market category, citing the limited convertibility of the Korean won in offshore currency markets.

"MSCI acknowledged the government's efforts to advance the foreign exchange and capital markets, but for some of the remaining tasks, efforts to improve the system are still under way," the Ministry of Finance and Economy said in a statement in response to the announcement.

The finance ministry added that South Korea was not included in the developed-market category this year as the market also needed time to fully reflect the impact of the completed reforms.

"If we continue to implement reforms in the foreign exchange and capital markets on our own schedule, we believe we can be included among advanced economies," the finance ministry said.

It added that the country will continue efforts to communicate with major overseas investors and reflect their feedback in its policies.

South Korea has been pushing for inclusion in the MSCI developed-market category in 2027, setting 39 key tasks to achieve the goal and planning to complete 28 of them by the end of this month.

"MSCI acknowledges the measures announced by Korean market authorities to address these long-standing concerns," the finance company said. "However, investors have communicated that the underlying issues have not been fully resolved."

MSCI, meanwhile, noted the limited convertibility of the Korean won in the offshore currency market as a key barrier to reclassification.

"Even more concerning, onshore liquidity during the extended FX trading hours remains largely insufficient to support tight execution at standards comparable to those observed in developed markets, constraining FX operational flexibility for index replicators and others."

MSCI categorizes countries into developed, emerging, frontier and standalone markets. South Korea needs to be placed on the watch list for developed-market status for at least one year before being fully upgraded to the developed-market category.

"MSCI will continue to monitor the implementation and engage with market participants and Korean authorities," it added.