South Korea's stock market has again failed to be designated as a country on the watch list for inclusion in the Morgan Stanley Capital International (MSCI) developed market index.
On the 25th at 10 a.m. Korean time, MSCI announced the '2025 market classification review results.' MSCI noted that despite the efforts of South Korean financial authorities to improve the system, there are still shortcomings in market accessibility. It pointed out that restrictions on the offshore foreign exchange market limit the liquidity of the won, asserting that merely extending the operational hours of the foreign exchange market is insufficient.
MSCI highlighted that although Korea has transitioned the Investor Registration Certificate (IRC) to the Legal Entity Identifier (LEI), there are still restrictions related to omnibus accounts and over-the-counter (OTC) transactions. It also indicated that in a situation where demand for products for increasingly diverse investment strategies like exchange-traded funds (ETFs), futures, options, and structured products is growing, the Korean market still lacks accessibility related to derivatives.
MSCI positively assessed the full resumption of short selling. However, it also stated that investors remain concerned about the risks associated with sudden regulatory changes.
MSCI stated, "We will continue to monitor changes in the Korean market," adding that "discussions for potential market reclassification will take place only after addressing all raised issues and allowing market participants to adequately assess their effects."
With the failure to be designated as an MSCI watch list country, the Korean stock market will face the challenge again in 2026. The government, relevant institutions, and the financial investment community plan to establish a roadmap for the MSCI developed market inclusion and continue institutional improvements.
MSCI categorizes global stock markets into developed, emerging, and frontier markets, with Korea classified as an emerging market. Korea was placed on the watch list for inclusion in the MSCI developed market in 2008, but it fell through due to insufficient accessibility. Since 2014, it has also been removed from the watch list.
Earlier, global investment bank UBS projected that if the Korean stock market is included in the developed market, there could be an inflow of up to $25 billion (approximately 34 trillion won).