MSCI Rejects South Korea Upgrade Over Won Trading
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- MSCI maintained South Korea's emerging-market classification in its latest review, disappointing hopes of a placement on the Developed Markets watchlist, with CEO Henry Fernandez citing won trading restrictions as the primary obstacle.
- Fernandez told CNBC that the Korean won can only be bought and sold during Seoul's daytime office hours, unlike currencies in the U.S., U.K., France, Germany, and Japan, making portfolio rebalancing difficult for global index fund managers.
- South Korea's Kospi index was the world's best-performing equity index in 2025, surging 112% year-to-date, and overtook London's FTSE 100 to become the eighth most valuable national equity index globally.
- MSCI also flagged rigid investor identification systems, restrictions on in-kind transfers and off-exchange transactions, and limits on investment products tied to exchange data governance as additional reasons against the upgrade.
- South Korea is preparing to launch 24-hour trading in the dollar-won spot market on July 6, but Fernandez questioned whether overnight trading would generate sufficient liquidity and tight bid-ask spreads to satisfy MSCI.
- South Korea is already classified as developed under rival FTSE Russell's classification scheme, underscoring the specificity of MSCI's concerns.
- Index funds account for roughly a third of the global money managed on indexes, per Fernandez, amplifying the practical impact of currency-market access constraints on rebalancing decisions.
Why it matters: South Korea's Kospi surged 112% in 2025 and overtook the FTSE 100 to become the world's eighth most valuable equity index, yet MSCI's continued emerging-market classification means the roughly one-third of index-tracked money tied to MSCI benchmarks faces persistent rebalancing friction from won trading-hour limits. The July 6 launch of 24-hour won trading targets the technical barrier, but Fernandez's stated doubts about overnight liquidity leave Seoul needing to prove depth and tight bid-ask spreads before any upgrade is on the table.
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