Inclusion in the Distant Global Sovereign Bond Index... Korea Fails Again (Comprehensive)

FTSE Russell Evaluates "Meaningful Progress"
Status as Watchlist Country Maintained
Ministry of Economy and Finance Aims for Inclusion in September

The South Korean government's effort to include Korea in the World Government Bond Index (WGBI) to attract foreign capital has once again failed. The existing status as an observation country for the bond index was maintained.

FTSE Russell of the Financial Times Stock Exchange (FTSE) in the UK announced the "March 2024 FTSE Bond Market Country Classification" on the 28th (Korean time), maintaining Korea's status as an observation country for WGBI inclusion. This means the inclusion in the World Government Bond Index has been postponed.

FTSE Russell explained that it will continue to monitor the measures announced by the Korean government and the market's response to them.

FTSE Russell stated, "There has been meaningful progress in the past six months regarding the Korean government's institutional improvements to enhance foreign investors' access to the government bond market," and added, "We have actively reflected practical issues and opinions raised by global investors related to the implementation of these measures."

On the 9th, the KOSPI opened at 2703.30, up 2.37 points (0.09%) from the previous trading day, as employees worked in the Hana Bank dealing room in Jung-gu, Seoul. In the foreign exchange market, the won-dollar exchange rate started at 1085.0 won, down 0.4 won from the previous trading day. Photo by Kim Hyun-min kimhyun81@

The government has been promoting various institutional improvement plans to be included in the WGBI. Since January last year, it has implemented tax exemption on foreign investors' income from government bonds, and abolished the Investor Registration Certificate (IRC) system for foreign investors in December last year.

However, a second task remains. The government aims to enable the opening of integrated government bond accounts with international central securities depositories (ICSDs) such as Euroclear and Clearstream around June this year. In July, it plans to implement "foreign exchange market structural improvements," which include direct participation of foreign financial institutions (RFIs) in the domestic foreign exchange market and extension of market hours.

The Ministry of Economy and Finance stated, "We will steadily promote institutional improvements for foreign investment with the goal of WGBI inclusion in September." It added, "Besides institutional improvements, we consider the confidence of global investors in accessing the Korean government bond market and the enhancement of investment attractiveness as decisive factors for inclusion, and we will expand communication with global investors."

Due to this failure to be included, the next decision is expected to be in September. FTSE Russell regularly decides on WGBI inclusion in March and September by considering factors such as bond issuance volume, national credit rating, and market accessibility.

The WGBI includes government bonds from 25 major countries such as the United States, the United Kingdom, Canada, and Japan, with estimated assets under management of about $2.5 trillion (approximately 3,300 trillion KRW).