The South Korean stock market is pushing for inclusion in the MSCI (Morgan Stanley Capital International) advanced market index to escape the chronic ‘Korea Discount’ and be properly evaluated. On the 9th, the government disclosed the ‘Comprehensive Roadmap for Foreign Exchange and Capital Markets for MSCI Advanced Market Index Inclusion’ in consultation with relevant agencies.
To achieve this, the government plans to improve the structure of the foreign exchange and capital markets and establish an advanced investment environment. If the process goes smoothly, the inclusion will be decided next year, and funds tracking the MSCI advanced index are expected to flow into the country during President Lee Jae-myung’s term. MSCI annually classifies major global stock markets into four groups: advanced markets, emerging markets, frontier markets, and independent markets.
The South Korean stock market was designated as a candidate for the advanced index in 2008 but was excluded from the watchlist in 2014. Although South Korea meets the criteria for advanced markets in terms of economic development stage, market size, and liquidity, it is still classified as an emerging market due to insufficient market accessibility.
To be included in the MSCI advanced index, the government will reform foreign exchange transactions, securities investment systems, and market infrastructure to meet international standards and implement eight tasks to make it easier for foreign investors to access the South Korean market. If the tasks are effectively carried out, South Korea could be placed on the watchlist in MSCI’s annual market classification announced in June this year, and the decision for inclusion in the advanced market index could be made in June next year.