South Korea remains steadfast in its pursuit of **developed-market status** within the **Morgan Stanley Capital International (MSCI) index**, following the decision by the index provider to retain Asia’s fourth-largest economy in the **emerging-market category**, the finance ministry confirmed on Wednesday.
MSCI announced overnight that **South Korea** would persist in the **emerging-market category**. This decision comes despite Seoul’s dedicated efforts to be added to the **watch list for developed-market inclusion**, primarily due to concerns over the **limited convertibility of the Korean won** in **offshore currency markets**.
In response to MSCI’s announcement, the **Ministry of Finance and Economy** stated, “MSCI acknowledged the government’s proactive efforts to advance the **foreign exchange and capital markets**. However, for some of the remaining critical tasks, comprehensive efforts to enhance the system are still actively in progress.”
The **finance ministry** further elaborated that **South Korea’s inclusion** in the **developed-market category** was not granted this year, as the market requires additional time to fully integrate and reflect the positive impact of recently implemented **financial reforms**.
“By consistently implementing strategic **reforms in the foreign exchange and capital markets** according to our timeline, we are confident that **South Korea** can achieve **inclusion among advanced economies**,” the finance ministry affirmed.
The ministry also emphasized the nation’s ongoing commitment to engaging with key **overseas investors** and incorporating their valuable feedback directly into **national economic policies**.
**South Korea** has set an ambitious target for **MSCI developed-market category inclusion by 2027**, outlining 39 crucial tasks to achieve this objective, with plans to finalize 28 of these initiatives by the close of the current month.
“While MSCI acknowledges the measures announced by **Korean market authorities** to address these long-standing concerns,” the index provider noted, “investors have clearly communicated that the fundamental underlying issues have not yet been fully resolved.”
Furthermore, MSCI specifically highlighted the **limited convertibility of the Korean won** in the **offshore currency market** as a significant barrier hindering **South Korea’s index reclassification**.
MSCI added, “Even more concerning, **onshore liquidity** during the recently extended **FX trading hours** largely remains insufficient to facilitate tight execution, meeting the rigorous standards comparable to those consistently observed in **developed markets**. This significantly constrains **FX operational flexibility** for **index replicators** and other market participants.”
MSCI strategically categorizes countries into distinct market classifications: **developed, emerging, frontier, and standalone markets**. For **South Korea** to achieve its goal, it must first be placed on the **watch list for developed-market status** for a minimum period of one year before a full upgrade to the **developed-market category** can be considered.
“MSCI will persist in monitoring the implementation of these reforms and will continue to actively engage with both **market participants** and **Korean authorities**,” the index provider concluded.
