South Korea MSCI Upgrade Delayed by Foreign Exchange Constraints

South Korea will continue pursuing inclusion in MSCI’s developed-market index after the country remained classified as an emerging market because of unresolved foreign-exchange restrictions.

The South Korea MSCI decision highlights continuing concerns among international investors over market accessibility despite ongoing regulatory reforms.

MSCI said limited offshore convertibility of the Korean won and insufficient onshore liquidity during extended foreign-exchange trading hours continue to reduce operational flexibility for global investors and passive index funds.

South Korea’s finance ministry said it would continue implementing capital-market and foreign-exchange reforms according to its own timetable while maintaining dialogue with overseas institutional investors.

The South Korea MSCI upgrade remains a long-term objective for Seoul, which hopes developed-market status will attract greater international investment and help narrow the persistent "Korea discount".

However, MSCI noted that many investors believe key market-access barriers have yet to be fully resolved.