Korea may need to wait at least two years to get the Korea Exchange included in MSCI’s developed market index, an analyst at Mirae Asset Daewoo Securities said Thursday.

Asia’s fourth-largest economy, an emerging market according to MSCI, was taken off the review list for a potential upgrade to developed market in 2014, with MSCI citing the “absence of any significant improvements in key areas negatively affecting accessibility.”


“Getting back on the list for potential inclusion as developed market will be possible but it will take more than two years to gain the status of a developed nation,” said Kim Young-sung, an analyst at the brokerage firm.

The MSCI categorizes 78 countries into three benchmark indices -- developed, emerging and frontier markets. Its rival index provider FTSE has moved the country to developed-market status in 2008. Indexing decisions by MSCI and FTSE are closely followed by investors around the world and influence the buying and selling of global funds.

The analyst’s comment comes as the index is expected to decide final candidate countries for the developed market status at its annual review meeting in June.

“Korea has met with one of the requirements that MSCI suggested which is the omnibus account system. But the opening of an offshore exchange market for the local currency and removing inconveniences for offshore traders with regard to the identification system won’t be solved in a short period of time,” Kim said.

In January, the Financial Services Commission said it will introduce a single, so-called “omnibus account” for foreigners trading local stocks, which would bring an end to an unpopular rule that currently requires offshore money managers to buy or sell shares through a separate account for each of their funds.

MSCI chairman Henry Fernandez said that he expected “such improvements to boost convenience for foreigners,” while vowing to “proactively convey such changes in South Korea to global investors,” during his visit to Seoul in January.

To qualify for the inclusion, Korea also plans to extend stock market trading hours and foreign exchange trading session by 30 minutes while MSCI requested for 24-hour trading of the won.

By Park Han-na (hnpark@heraldcorp.com)