In its annual market classification review, the global index provider said South Korea would not be added to its watch list for a potential upgrade — effectively stalling any chance of reclassification until at least 2026. The decision also delays possible inclusion in the MSCI Developed Market Index to 2028 or beyond.
“MSCI will continue to monitor the implementation and market adoption of measures to enhance the accessibility of the Korean equity market,” the firm said in a statement.
The announcement follows a series of market reforms by South Korean authorities aimed at addressing longstanding concerns from global investors.
In March, the government lifted a ban on short-selling, which had been in place since 2020, and implemented measures to curb illegal trading practices. Still, MSCI said these efforts had not gone far enough.
“As a reminder, potential reclassification consultations require that all issues have been addressed, reforms have been fully implemented, and market participants have had ample time to thoroughly evaluate the effectiveness of the changes,” the firm said.
South Korea has been classified as an emerging market since its inclusion in MSCI’s indices in 1992. It briefly appeared on the watch list for developed market consideration in 2008, only to be removed in 2014 due to what MSCI described as “insufficient progress” on market accessibility.
The latest review underscores the complexity and high bar of MSCI’s evaluation criteria. While the index provider last week upgraded South Korea’s short-selling accessibility rating from negative to positive, six other categories — including liberalization of the foreign exchange market, investor registration, and settlement infrastructure — continue to receive negative assessments.
MSCI noted that, despite recent reforms to South Korea’s foreign exchange regime, “operational difficulties persist in registration procedures, and the limited use of omnibus accounts and over-the-counter trading constrains the effectiveness of related measures.”
In April, Kim Byoung-hwan, chairman of the Financial Services Commission, met with senior MSCI executives to advocate for the country’s upgrade and outline Seoul’s ongoing reform agenda. The meeting, however, appears to have had little effect on MSCI’s deliberations.
reporter
Kim Dong-young
davekim0807@ajupress.com
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