Korea wants to get MSCI’s developed market statues

Morgan Stanley Capital International (MSCI), the world’s leading provider of investment decision support tools, may include Korea on its list of developed markets this year, experts said Friday.

They warned, however, that the country could face difficulties drawing funds from investors while competing with the U.S., Western Europe, Japan and other regions with developed economies.

The Korea Exchange (KRX), the country’s sole securities exchange operator, has asked MSCI to include Korea’s stock market, including its benchmark KOSPI, in its index for developed economies since 2009.

There are 23 countries on the list. These include the U.S, Canada, Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Israel, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, Australia, Hong Kong, Japan and New Zealand.

According to the KRX, up to $7 trillion was benchmarked to MSCI indexes worldwide as of July last year. It added that $3.25 trillion was invested on stock markets, including those of developed countries.

“It is estimated that 90 percent of such stock investment was made into a bourse run by advanced economies,” a senior KRX official said, asking not to be named. “That shows why we have tried to join the group of rich nations.”

He said the KRX officials this month will head to Hong Kong to visit the Asian headquarters of MSCI Barra that draw up the indexes.

According to him, the KRX will explain its plan to open a night-time trading session for dollar currency futures from 6 p.m. to 5 a.m. MSCI has asked Korea to improve its time restrictions on foreign currency trading.

“The MSCI has cited our stock regulations as obstacles for a smooth flow of foreign currencies,” said the official. “It’s not mandatory for us to explain to MSCI our efforts to join the developed economies before it makes the decision in June, but we hope it will help to achieve our goal.”

Lim Hee-jung, a research fellow at Hyundai Research Institute, shared a similar view.

“Korea’s economic fundamental has improved for the past few years, and its economy has differentiated itself from that of other emerging markets,” he said.

“The investors favor investment of stock markets of advanced economies over emerging markets because their economies are relatively stable. And I think Korea has a chance this year.”

The KRX official, however, said Korea would take time to attract investors if it joins the list of developed countries.

Lim also said, “It is inevitable for the country to wait for its economy to grow to compete against the countries bigger economies.”

Lee Jae-hun, an economist at Mirae Asset Securities’ Korea Research Center, instead said that the country is likely to fail again.

“The MSCI has pointed out foreign investors’ accessibility is the biggest obstacle for Korea to join the developed economies and nothing has been improved since last year,” he said.

“The night-trading session may help to persuade MSCI, but in general there are other regulations that make international fund managers difficult to invest in the Korean stock market.

“Such conditions have to be fulfilled alongside improvement to the economic fundamentals, which we have not done.”

Lee Chang-seon, a senior research at LG Economic Research Institute said “Korea’s economic fundamentals can play a positive role in joining the group of developed countries.”

He also said it is not “too urgent” for the country to try to join the list.

“We have benefited from being a part of emerging markets and it will not be a problem even if we don’t make the list this year.” By Yi Whan-woo The korea times

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