MSCI Keeps South Korea Emerging, Delays Indonesia
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- MSCI kept South Korea classified as an "emerging market" in its Tuesday review, dashing hopes of inclusion in the Developed Markets watchlist — a prerequisite for any future upgrade.
- Indonesia had its market status assessment extended by MSCI until November, after MSCI froze Indonesian stocks from its indexes in January over investability concerns, with a potential downgrade to frontier-market status still on the table.
- MSCI cited limited offshore convertibility of the Korean won, a rigid investor identification system, restrictions on in-kind transfers and off-exchange transactions, and limits on investment products as key barriers to South Korea's reclassification.
- South Korea is preparing to launch 24-hour trading in the dollar-won spot market on July 6, the latest step to open its foreign exchange market to overseas investors.
- Benson Wu, Bank of America's chief Korea economist, told CNBC the path to developed-market status would be a "multi-year" process, with Seoul still lacking the resources to deliver and hedge its currency.
Why it matters: Indonesia now faces a concrete November deadline: if MSCI deems Jakarta's market-accessibility reforms insufficient, the country could be downgraded from emerging-market to frontier-market status, compounding the stock freeze MSCI imposed in January. South Korea's continued exclusion from the Developed Markets watchlist perpetuates the 'Korea discount' valuation gap, with the July 6 launch of 24-hour dollar-won spot trading representing the next measurable test of Seoul's reform pace.
