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MSCI says it needs to see South Korea’s regulatory changes put into practice for market upgrade
MSCI chief executive Henry Fernandez said South Korea must show that its regulatory reforms work in practice before the country can be upgraded from emerging-market to developed-market status. The upgrade is a major pledge of President Lee Jae Myung’s government and could raise the profile of South Korean shares among global investors.
Fernandez pointed to the won’s limited offshore spot trading as an unresolved issue, despite South Korea opening its currency market to 24-hour trading in July. The government has also introduced market and tax reforms, while regulators are considering wider English-language company filings and measures to encourage dividends. In June, MSCI recognised the reforms but said investors needed time to assess their lasting impact.
In short
- MSCI wants South Korea’s reforms proven in practice before an upgrade.
- The won’s offshore trading remains a concern.
- Investors need time to assess whether changes will last.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Upgrading South Korea could better recognise reforms intended to make its markets more accessible and attractive to international investors. Supporters can argue that the government has taken meaningful steps, including extending currency trading hours, and that an upgrade could raise the profile of Korean companies and broaden their access to global capital.
The case against
MSCI can reasonably require evidence that reforms work in day-to-day trading before changing the market classification, since investors depend on that label to reflect practical access and reliability. The won still has limited offshore spot trading, and investors may need more time to assess whether the announced changes have lasting effects.
Explained simply
MSCI is a global index provider whose country classifications help guide how many investment funds allocate money. South Korea is currently classed as an emerging market, and its government wants it recognised as a developed market.
The government has changed rules on trading, taxes and company disclosures to make South Korean shares easier for overseas investors to access. One issue is whether the won can be traded readily outside the country; opening domestic currency trading for longer hours may not resolve that concern.
A developed-market classification could bring more attention from global investors, though it does not guarantee that investment will increase. MSCI has recognised the reforms, but says their effects need to be seen over time.