South Korean Stock Market Misses Out on MSCI Developed Markets Index Inclusion... "Won Conversion Remains Limited"

[Financial News] The South Korean stock market has once again failed to be included in Morgan Stanley Capital International (MSCI)'s Developed Markets Index.
MSCI said in its "MSCI Annual Market Classification Review" released on the 23rd (local time) that it did not place South Korea on the watchlist for developed market index inclusion.
MSCI said it "recognizes the measures announced by Korea's market authorities to address long-standing concerns," but added that investors said the fundamental issues had not been fully resolved.
Limited conversion of the Korean won in the offshore foreign exchange market was among the obstacles. At present, the Korean won is mainly traded offshore through non-deliverable forwards (NDFs), which are settled in dollars for the price difference only, rather than through physical delivery.
MSCI noted that "the Korean won cannot be physically delivered offshore" and that although trading hours in the onshore foreign exchange market have been extended, liquidity remains insufficient.
It also said market participants have been facing significant operational burdens due to the newly introduced market surveillance rules since short selling was fully resumed in March last year.
MSCI stated that for consultations on a potential market reclassification to move forward, all raised issues must be resolved, reforms must be fully implemented, and market participants must have enough time to properly assess the lasting effects of the changes.
MSCI classifies stock markets around the world into developed, emerging, frontier and standalone markets. The developed markets index currently includes 23 countries, including the United States, Japan and the United Kingdom, while South Korea is included in the emerging markets index along with China and India.
South Korea was added to the emerging markets index in 1992 and first appeared on the watchlist for developed market inclusion in 2008. However, MSCI removed South Korea from the watchlist in 2014, citing difficulties in converting the won and restrictions on the use of exchange data.

jisseo@fnnews.com Seo Min-ji Reporter