MSCI Developed-Market Hopes, and Now Capital From Hong Kong
Financial regulators are reportedly working toward including Korea in the MSCI Developed Markets Index by June, pushing through regulatory changes to lower barriers for foreign investors. Measures under discussion include easing personal-information disclosure requirements for foreign stock trading and expanding the omnibus account system for foreign investors.
The hosts explained the MSCI index system using an analogy to a consumer price index built from the price of jajangmyeon and kalguksu noodles. MSCI, created by Morgan Stanley, divides global equity markets into developed and emerging categories and assigns each country a weighting based on market capitalization; large pools of passive money track these indices directly, so a country's inclusion or exclusion can dramatically shift capital flows.
Korea currently sits in the emerging markets index despite ranking 8th globally by market capitalization, held back by concerns over foreign investor access, restrictive regulations, and short trading hours. If promoted to developed-market status, Korea's weighting is estimated at 2-3% of that index, which analysts estimate could draw roughly $40 billion a year in new inflows -- equivalent to about 40-60 trillion won.
Korea was dropped from MSCI's watchlist for developed-market consideration under the previous administration. With the current government now pushing regulatory reforms, the hosts expect clarity on whether Korea re-enters the watchlist around June or July. They noted that index inclusion ultimately depends on the market itself being attractive, so the KOSPI's current strength is feeding a virtuous cycle that raises the odds of inclusion.
Separately, direct access to Korean stocks -- previously available only through US brokerages -- appears set to expand to brokerages based in Hong Kong as well. Given Hong Kong's status as one of Asia's top financial hubs, the hosts expect this channel to bring in a meaningful amount of additional capital.