South Korean Stocks Likely to Join Developed Market Index, Says Regulator

The deputy head of South Korea's financial regulatory body said on Monday that it is very likely the nation's stock market will be added to an important developed market index soon. "We observe a strong likelihood of being included shortly, if not this time," stated Kim So-young, Vice Chairman of the Financial Services Commission, during a press conference in Seoul for international media, per a Reuters report.

Asia's fourth-largest economy's stock market is presently classified as an emerging market by global index provider Morgan Stanley Capital International (MSCI), even though numerous other indicators suggest its developed-economy status.

Last month, South Korea removed a comprehensive market-wide prohibition on short selling of stocks for the first time in five years, a restriction foreign investors and MSCI had identified as a significant barrier to market access. "Kim stated that over 90 per cent of the problems presented by MSCI have been addressed." He mentioned that Chairman Kim Byoung-hwan plans to talk about recent progress with foreign investors and the index provider in the U.S. this week. MSCI plans to assess its market classifications in June. Usually, the index provider keeps a market on a watch list for one to two years before any reclassification.

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The administration of former President Yoon Suk Yeol introduced various measures in recent years to improve market access for foreigners and address the so-called "Korea Discount", referring to the tendency for domestic stocks to be undervalued. Regarding a recent revision to the Commercial Act aimed at resolving the "Korea Discount", which was passed by parliament but vetoed, Kim said it was more desirable to amend the Capital Markets Act to minimise side effects. Earlier on Monday, South Korea's leading presidential candidate, Lee Jae-myung, pledged to revive legislation to curb abuses by controlling shareholders as part of a plan to bolster the stock market. Kim said the authorities were also reviewing regulatory improvements concerning share issuance following a series of controversial capital-raising plans, including that of Hanwha Aerospace (012450.KS), opening a new tab which faced investor criticism.