Korea expected to gain MSCI developed market status as short selling resumes
Financial Services Commission Vice Chairman Kim So-young speaks during a press conference at Government Complex Seoul, Monday. Courtesy of Financial Services Commission
Korea now has a very high chance of achieving developed market status from global index provider Morgan Stanley Capital International (MSCI) amid improvements to the domestic capital market, such as the March 31 resumption of short selling, Financial Services Commission Vice Chairman Kim So-young said Monday.
Kim noted that the government had received feedback from MSCI regarding areas needing improvement and has since made efforts to address them. These efforts included enhancements to the short selling system, its resumption and improved accessibility for foreign investors.
“There were multiple shortcomings pointed out, but more than 90 percent of them have been resolved,” he said during a press conference in Seoul. “We are now at the stage of monitoring whether investors are actually experiencing the improvements and whether those changes are being implemented smoothly.”
He added, “Overall, even if it may not happen in the very next review, Korea has a very high chance of being included in the MSCI Developed Markets Indexes in the near future.”
The country’s ban on stock short selling was put in place in November 2023 after a series of naked short selling violations involving several global investment banks were discovered. The practice was fully resumed on March 31 this year.
MSCI announces the results of its global market classification review every June. In its 2024 review, Korea remained classified as an emerging market, with MSCI citing the country’s ban on short selling as an additional restriction on market accessibility.
The next chance to be considered for the developed markets index will come this June.
To be upgraded, a country must first be placed on MSCI’s watch list for at least one year. If Korea is added to the watch list in June this year, the formal announcement of its inclusion in the developed markets index would come in June 2026, with actual inclusion taking effect in June 2027.
The MSCI Developed Markets Index attracts more capital than the Emerging Markets Index, with a significant portion coming from long-term investors, potentially resulting in a more stable flow of foreign investment into Korea.