Morgan Stanley Capital International (MSCI) assessed on the 20th that the Korean stock market still faces constraints regarding accessibility.
MSCI released its annual market accessibility review ahead of the country-specific market classification. The Korean stock market received 'minus' (improvement needed) in 7 out of 18 evaluation criteria last year, but this year the number of 'minus' criteria has decreased to 6.
This is thanks to the full resumption of short selling starting from March this year, which changed the relevant criteria to 'plus.' MSCI noted, "We will continue to monitor the situation to assess the stability of the short selling system."
MSCI evaluated that "a series of reform measures have been implemented," including extending foreign exchange market trading hours and allowing foreign institutional investors (FIIs) to participate in the domestic interbank foreign exchange market.
However, MSCI stated, "There are still constraints in the Korean foreign exchange market," adding, "Without transitioning to a complete Legal Entity Identifier (LEI), existing accounts still face difficulties in using omnibus accounts due to the reliance on Investment Registration Certificates (IRCs)."
MSCI also remarked that very few "deciding on dividends up front - investing afterward" corporations adopt this practice, which enables them to determine dividend status and amount prior to the dividend record date. Furthermore, it stated, "Due to restrictions on the use of stock market data, investment products are limited."
With MSCI noting that there are many areas for improvement in the accessibility of the Korean stock market, the uncertainty regarding whether it will be placed in the 'Watch List' for advanced market inclusion during the market classification on the 25th has increased.
MSCI categorizes global stock markets into advanced markets, emerging markets, and frontier markets, with Korea classified as an emerging market. In 2008, Korea was placed on the Watch List for potential inclusion in the advanced market, but it was unsuccessful due to a lack of accessibility. Since 2014, it has also been excluded from the Watch List.
If MSCI places Korea on the Watch List as a result of this year's annual market reclassification, it will undergo a one-year evaluation. If the criteria are met, inclusion in the advanced market could occur as early as May 2027.