- Currency, derivatives and gold trading will also be extended
- Move comes before MSCI reviews market classification in June
South Korea will extend trading hours for stock and foreign-exchange markets by 30 minutes as it seeks to increase liquidity and bolster its case for inclusion in MSCI Inc.’s developed-market equity indexes.
The share, currency, derivatives and gold markets will close at 3:30 p.m. local time from Aug. 1 and the longer trading hours should boost equity-trading volumes by about 8 percent, Korea Exchange said in a statement. Liquidity has been “stagnant” over the past decade with daily trading value of around 4 to 5 trillion won ($3.4 billion to $4.2 billion), the bourse said in the statement.
MSCI releases its annual review of country classification next month, and South Korea is seeking an upgrade from emerging- to developed-market status to open the door to a larger pool of investors. The index provider cited the absence of an extension in won trading hours when it took South Korea off its shortlist for developed-index inclusion in 2014. The country’s Financial Services Commission said on Tuesday that it would start testing a new system this week to make it easier for foreigners to invest in Korean stocks.
The longer hours may boost trading in the short-term but the effect in the longer-run will be negligible and it won’t be much help for inclusion in MSCI’s developed indexes, said Bae Sung Young, an analyst at Hyundai Securities Co. in Seoul. The impact on the foreign-exchange market will also be limited, said Nam Kyung-Tae, a currency trader at Industrial Bank of Korea.
“If the purpose of this is to help Korean financial markets be on a par with advanced markets, I think there’s a good possibility of further extensions,” Nam said. “This could cause more volatility as trading hours get closer to those of London.”
MSCI Chairman Henry Fernandez said in January that improvements to the foreign investors’ registration system and data accessibility for derivatives products, as well as making the won available for trading around the clock, were prerequisites for any upgrade of South Korea. The nation is unlikely to be included in MSCI’s developed-market index this year, the Korea Economic Daily reported last week, without saying where it got the information.