President Lee Jae-myung expressed regret on July 15 over South Korea's failure to gain inclusion in the MSCI developed market index, citing the need for domestic stock market stabilization. Speaking at an economic ministry briefing at the Blue House, Lee questioned Deputy Prime Minister and Finance Minister Koo Yun-chul about obstacles preventing the upgrade, noting that Korea's stock market remains unstable following historic rapid gains. Korea has remained classified as an emerging market for 12 years since being removed from MSCI's watch list in 2014, with the index provider citing persistent restrictions on offshore won currency trading in its rejection announced last month.
President Lee Questions MSCI Upgrade Obstacles at Economic Briefing
At the Blue House briefing, President Lee stated, "The MSCI developed market index inclusion didn't happen this time," adding that "the domestic stock market is quite unstable, and in fact, because there were unprecedented historic surges in such a short period, stabilization requires time and fluctuation." Lee then asked Deputy PM Koo, "MSCI index inclusion helps stabilize by creating international demand, right? Why isn't this working out well?"
Deputy PM Koo Cites 24-Hour Won Trading as Primary Barrier
Deputy PM Koo responded that "it's not that it's not working well, but we have our own pace," explaining that "the capital market needs to stabilize, and when the won moves rapidly all at once, there are risks to the foreign exchange market, so as we proceed at our pace and pursue practical benefits to join MSCI as soon as possible, there is that aspect." When President Lee asked about the biggest obstacle while questioning whether pacing control was necessary, Koo identified "the biggest obstacle among several is the requirement to enable 24-hour won trading." He added, "If we expose the foreign exchange market all at once when it's not prepared, there could be adverse effects."
Government Plans System Preparation by Early Next Year
Deputy PM Koo stated, "We expect to make many institutional improvements by early next year, and we're thinking of actively pursuing it next year." When President Lee asked again whether time alone would resolve the fundamental concern, Koo replied, "By early next year, we can create considerable countermeasures and systems." MSCI announced at the end of last month in its annual market classification results that it did not place the Korean stock market on the developed market watch list, citing continued restrictions on won currency conversion in offshore foreign exchange markets.
FAQ
Why did MSCI reject Korea's developed market upgrade?
MSCI cited persistent restrictions on offshore won currency trading as the primary reason for excluding Korea from its developed market watch list in the annual classification announced last month. Deputy PM Koo identified the requirement for 24-hour won trading as the biggest obstacle, noting that exposing the foreign exchange market before adequate preparation could cause adverse effects.
When does the Korean government plan to address MSCI requirements?
Deputy PM Koo stated at the July 15 briefing that the government expects to implement many institutional improvements by early next year and plans to actively pursue MSCI inclusion next year. He indicated that by early next year, the government can create considerable countermeasures and systems to address foreign exchange market concerns.
