South Korea Listed as Watchlist Country for 'World Government Bond Index'... Official Inclusion Possible as Early as Next Year

Expect Up to 90 Trillion Won in Foreign Capital Inflow When Korea Discount Is Resolved

[Asia Economy Sejong=Reporter Kwon Haeyoung] Amid growing concerns over foreign capital outflows due to the US's aggressive monetary tightening, South Korea has been listed as a Watch List country for the 'World Government Bond Index (WGBI),' one of the world's top three bond indices. If included in the index as early as September next year, the Korea discount on won-denominated bonds could be eliminated, potentially attracting up to 90 trillion won in foreign investment in government bonds.

The Ministry of Economy and Finance announced on the 30th that FTSE Russell, a subsidiary of the London Stock Exchange, classified South Korea as a Watch List country with potential for market accessibility upgrade (Level 1 → Level 2) on the 29th (local time). ▶Related article on page 4

FTSE Russell classifies countries twice a year, in March and September, and operates bond indices such as the WGBI based on this classification. The WGBI is one of the world's top three bond indices, indexing government bonds from 23 countries including the US, UK, and Japan, and is followed by global bond funds. South Korea is currently at Level 1, and must be upgraded to Level 2 to be included in the WGBI. If consultations proceed smoothly after this Watch List designation, a market accessibility level upgrade and final inclusion in the WGBI could be expected as early as next year. Inclusion of Korean government bonds in the WGBI is anticipated to attract up to 90 trillion won in foreign government bond investments.

Choo Kyung-ho, Deputy Prime Minister and Minister of Economy and Finance, stated, "This WGBI Watch List designation is an important milestone recognizing the Korean government bond market as one of the advanced bond markets, helping to eliminate the won bond discount and advance the government bond market." He added, "We will actively pursue institutional improvements so that global investors can easily and quickly access and conveniently invest in the Korean government bond market going forward."