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Photo = Yonhap news |
[Alpha Biz= Paul Lee] South Korea has once again failed to be included in Morgan Stanley Capital International’s (MSCI) Developed Market (DM) Index watchlist, dashing hopes for its upgrade from Emerging Market (EM) status. MSCI announced its 2025 annual market classification review on June 24 (local time), stating that there would be no changes to South Korea’s classification.
“We will continue to monitor the implementation and market adoption of measures aimed at improving accessibility to the Korean equity market,” MSCI noted.
While acknowledging Korea's recent progress — including the full lifting of the short-selling ban in March and enhanced oversight of illegal short-selling practices — MSCI highlighted persistent concerns. “Although market activity has resumed, investor concerns remain over the operational burden of compliance and the risk of abrupt regulatory changes,” the index provider stated.
MSCI emphasized that for Korea to be reclassified as a Developed Market, all outstanding issues must be addressed, full implementation of market reforms is required, and market participants must be given sufficient time to evaluate the impact of these changes.
To be considered for the Developed Market Index, a country must be placed on the MSCI Watchlist for at least one year. With South Korea failing to secure Watchlist status again this year, the next opportunity will be June 2025. If added to the list next year, actual index inclusion could take place as late as June 2028.
Ahead of the classification review, MSCI upgraded Korea’s “accessibility” assessment in the area of short-selling from “-” (improvement needed) to “+”, reflecting recent regulatory changes. Last year, Korea received a “-” in seven of 18 evaluation categories; this year, the number dropped to six.
Nonetheless, MSCI still sees room for improvement in key areas such as foreign exchange liberalization, investor registration and account setup, clearing and settlement systems, and the availability of investment products.
알파경제 Paul Lee 특파원(hoondork1977@alphabiz.co.kr)
