MSCI Keeps South Korea in Emerging Index as Won Curbs Block $30 Billion Inflow Hopes
Updated
Updated · Financial Times · Jul 9
MSCI Keeps South Korea in Emerging Index as Won Curbs Block $30 Billion Inflow Hopes
3 articles · Updated · Financial Times · Jul 9
Summary
MSCI left South Korea classified as an emerging market last month, saying foreign investors still face key access barriers despite Seoul’s market reforms and the Kospi’s surge.
24-hour won trading launched this week still requires onshore settlement, and MSCI said the lack of a fully convertible offshore won market and short-selling settlement weaknesses remain major obstacles.
1997 still shapes policy: after the won halved in two months and reserves fell to just four or five days of imports, Seoul kept tight control over currency trading and remains wary of capital flight.
President Lee Jae Myung has made an MSCI upgrade a priority, hoping it would draw roughly $30 billion in passive inflows and help narrow the Korea discount.
Analysts say the payoff is mixed because South Korea is 24% of MSCI’s emerging-markets index but would be only 3% of its developed benchmark, while broader governance and tax reforms are still needed.
Is South Korea's fear of a 1997 crisis repeat sabotaging its ambition to finally shed the 'Korea discount'?
Why are global corporations investing billions in South Korea while stock market investors are pulling out in record numbers?
With foreign funds fleeing and US trade threats looming, is South Korea's record stock rally built on a house of cards?
South Korea’s 2026 MSCI Verdict: Reforms, Market Accessibility, and the Persistent ‘Korea Discount’
Overview
In June 2026, MSCI decided to keep South Korea as an emerging market, a move widely expected by analysts due to ongoing issues with market accessibility and currency hedging. In response, South Korea quickly launched major reforms, including near-24-hour trading for the USD/KRW spot market, to address these concerns and show its commitment to further improvements. However, experts note that reaching developed-market status will be a multi-year process, as South Korea must continue enhancing its financial infrastructure and investor experience to meet MSCI’s strict criteria.