KOSPI’s ‘developed-market entry’ thwarted again, institutional barriers despite strength in Samsung and SK
KOSPI has risen nearly threefold since the beginning of last year, driven by gains in Samsung Electronics and SK hynix. However, its inclusion in the MSCI Developed Markets Index was thwarted again last month, with MSCI citing insufficient access for foreign investors and the offshore won market remaining closed. 1997Foreign-exchange controls and settlement regulations maintained since the foreign-exchange crisis are the backdrop.
South Korean stocks have risen nearly threefold since the beginning of last year, driven by strength in Samsung Electronics and SK hynix. Investor interest remains concentrated in large semiconductor stocks.
Inclusion in the MSCI Developed Markets Index was thwarted again last month. MSCI cited insufficient access for foreign investors and the fact that the offshore won market is not fully open.
Hwang Se-woon, a research fellow at the Korea Capital Market Institute, said the government does not allow offshore won trading because it is mindful of the trauma of the foreign-exchange crisis. The government was concerned about expanding foreign influence over the foreign-exchange market.1997The government’s concern was the expansion of foreign influence over the foreign-exchange market.
1997During the foreign exchange crisis, the won's value plunged by nearly half in just two months. Foreign-exchange reserves fell to a level sufficient to cover imports for 4~5days, and South Korea received a bailout from the International Monetary Fund.
After the foreign exchange crisis, the government maintained controls on the foreign exchange market, restricting trading hours and taking measures to allow won-denominated payments only domestically. At the same time, it significantly increased foreign-exchange reserves to strengthen stability.
President Lee Jae-myung presented inclusion in the MSCI Developed Markets Index as a key government priority. He said the government would pursue capital-market reforms, including strengthening the rights of minority shareholders and expanding access for foreign investors.
The current situation clearly demonstrates the gap between market performance and institutional accessibility. Whether to join the MSCI index and whether to ease foreign exchange market regulations remain key issues in future discussions.
Sources: 뉴시스 경제
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