MSCI Keeps Emerging-Market Rating on South Korea, Despite Push for Upgrade

South Korea has risen to become one of the world’s most advanced economies, with a roughly $2 trillion stock market.



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Yonhap News/Newscom/Zuma Press

MSCI Inc.

MSCI 3.95%

is sticking with its longstanding assessment of South Korea as an emerging market, despite the country’s renewed efforts to be upgraded to a developed one.

The index provider’s reluctance to reclassify South Korea, with no changes proposed in its latest annual review, could deprive local markets of tens of billions of dollars of inflows from global investors and is likely to disappoint politicians and regulators in Seoul.

In one recent concession to global investors, South Korea overhauled its currency market, which has been tightly controlled since the aftermath of the Asian financial crisis. Earlier this month Seoul said it would extend onshore foreign-exchange trading to 17 hours a day, from 6½ at present.

MSCI made no mention of South Korea when it announced the results of its annual market-classification review, in a statement issued late Thursday. It said it would consult investors on downgrading Nigeria from frontier-market status to a so-called standalone market. 

The index company reviews world markets every year, assessing how large, liquid and readily accessible to foreign investors they are. In the case of South Korea, MSCI recently highlighted several shortcomings in market accessibility. These included gaps in English-language corporate disclosure, curbs on foreign-exchange trading and a partial ban on short-selling, or betting against stocks. 

In just a few decades, South Korea has risen to become one of the world’s most advanced economies, with a roughly $2 trillion stock market that is home to companies such as

Samsung Electronics Co.

and

Hyundai Motor Co.

In 2020, South Korea had the world’s 10th largest economy in dollar terms, according to World Bank figures. China, the largest emerging market, ranks second on this list.

Write to Dave Sebastian at [email protected]

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