Inclusion in WGBI Begins, with Expectations of $60 Billion Inflows and a More Stable Exchange Rate

According to The Financial News, South Korea was officially included in the World Government Bond Index (WGBI), one of the three leading global bond indices, on the 1st. Market observers expect fresh inflows of 50 to 60 billion dollars into the domestic financial market. The move is also anticipated to help stabilize the won–dollar exchange rate, which had surged into the 1,500-won range in the wake of the war in the Middle East.
On the same day, the Ministry of Economy and Finance held the first meeting of the WGBI Standing Monitoring and Investment Promotion Task Force at Government Complex Seoul. Officials from the Financial Services Commission, the Bank of Korea (BOK), the Financial Supervisory Service (FSS) and the Korea Securities Depository (KSD) took part.
Chaired by Hwang Soon-kwan, Director General for Treasury, the meeting reviewed trends in foreign capital flows before and after the start of WGBI inclusion and discussed monitoring plans.
Hwang said, "Each institution must carefully track the trends in capital inflows and proactively identify any difficulties foreign investors may face," adding, "I also ask you to actively explore additional measures to encourage capital inflows."
The government plans to use the WGBI Standing Monitoring and Investment Promotion Task Force as the main channel to regularly review the status of foreign capital inflows. It will also conduct investor relations activities targeting overseas investors to maximize the benefits of joining the WGBI.
The WGBI is a global government bond index compiled by FTSE Russell under the Financial Times Stock Exchange Group (FTSE Group). As of April, a total of 26 countries are included in the WGBI. Among them, South Korea is expected to account for the ninth-largest weighting.
With Korean government bonds now part of the WGBI, major global investors such as large pension funds and asset managers around the world will automatically invest in Korean government bonds in line with the index’s prescribed weighting. The allocation will be phased in over about eight months starting in April.
skjung@fnnews.com Jung Sang-geun Reporter