Korea misses out again on MSCI upgrade

Korea failed to win developed market status on the global stock indices provided by Morgan Stanley, despite the hopes of being reclassified from an emerging market.

Morgan Stanley, the index operator of Morgan Stanley Capital International, announced its 2023 Annual Market Classification Review results Thursday. The MSCI is a widely followed global stock market index.

Korea will remain on the emerging market index without any changes, despite its efforts to move up to the developed market index. If Korea is included on the watch list next year, it will have to wait at least a year for the inclusion to happen.

In its 2023 Annual Market Classification Review, the MSCI said it was keeping a close eye on Korea, monitoring the proposed changes.

“Despite (the challenging global macroeconomic environment), certain markets, such as Korea, have proposed plans to enhance accessibility for foreign investors,” Dr. Dimitris Melas, global head of index research and product development and chairman of the MSCI Index Policy Committee, said in the report.

“Once in effect, these efforts will be subject to consultation with market participants to assess their impact and effectiveness.”

Earlier this month, the MSCI pointed out that Korea needed to open up access to its capital market through a separate market accessibility review. It specifically indicated Korea needs to improve the flow of information.

“Information disclosure in English has improved but is not always readily available for all companies,” it said.

It also said that the country’s dividend procedure is different from international standards.

Over the past few years, the government has been stepping up efforts to improve the local financial market for an index upgrade, such as mandating English information disclosures for listed firms, opening up the foreign exchange market, improving dividend procedures, and simplifying the registration process for foreign investors and more.

Institutions say a reclassification on the MSCI could lead to a net inflow of around 60 trillion won at the most.