The Korean stock market has failed to be included in the Morgan Stanley Capital International (MSCI) Developed Markets (DM) Index. It also failed to be listed on the watchlist, which is the pool of candidates for inclusion in the Developed Markets Index.
On June 24 (local time), MSCI announced on its website that, in the 2025 annual market classification results, Korea would continue to be classified as an Emerging Market (EM), as before.
Through its market accessibility review report, MSCI stated, "We will continue to monitor the implementation of measures to improve access to the Korean equity market and the level of market adoption."
The company also said, "In order for discussions to take place regarding the potential reclassification of the Korean stock market as a developed market, all issues must be resolved, market reforms must be fully implemented, and market participants must be given sufficient time to thoroughly assess the effects of these changes."
To be included in the MSCI Developed Markets Index, a market must be on the watchlist, the pool of index candidates, for at least one year. As Korea failed to be included in the watchlist this time, its bid for inclusion in the Developed Markets Index has been postponed to June next year. If Korea is added to the watchlist in June next year, actual inclusion would take place in June 2028.
Prior to this market reclassification, in the market accessibility assessment announced on June 20, the rating for Korea's short-selling accessibility was upgraded from "minus (needs improvement)" to "plus."
Last year, the Korean stock market received a "minus" rating in 7 out of 18 assessment categories. This year, with the short-selling accessibility category upgraded to "plus," the number of "minus" categories decreased to 6. However, areas such as foreign exchange market liberalization, investor registration and account setup, clearing and settlement, and investment product availability were still assessed as needing improvement.
In its evaluation report, MSCI noted that short-selling transactions resumed in the Korean stock market in March, improving short-selling accessibility, and stated, "We will continue to monitor developments to assess the stability of the system."
However, regarding the foreign exchange market, MSCI mentioned measures such as allowing foreign institutional investors (RFI) to participate in the domestic interbank foreign exchange market and extending foreign exchange market trading hours, and evaluated that "a series of reform measures have been implemented."
Nevertheless, MSCI pointed out, "There are still operational difficulties in the registration process for foreign investors," and added, "The use of omnibus accounts and over-the-counter (OTC) transactions remains limited, which restricts the effectiveness of related measures."
MSCI annually classifies major stock markets worldwide as developed markets, emerging markets, frontier markets, or standalone markets. These criteria directly affect the scale of investment by global institutional investors. Korea has been classified as an emerging market since 1992. In 2008, it was added to the watchlist, but failed to be listed due to insufficient market accessibility. In 2014, it was removed from the watchlist.
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