Illustration: Stephanie Davidson/Bloomberg
Why Bringing a $1.8 Trillion Stock Market to the Big Leagues Could Backfire
Korea’s ambition to become a developed market is spurring money managers to have second thoughts on whether such a move is a good idea — or even worth it.
For years, South Korea has been home to more global conglomerates than Hong Kong, boasted a higher purchasing power than Japan or Spain, registered a longer life expectancy than New Zealand and three years ago even briefly overtook Italy in GDP per capita. Yet every year, indexing giant MSCI Inc. has categorized the country as an emerging market, a designation that has hurt Korea’s investment potential and damped stock valuations.
Korea is tired of it. This year, ahead of an annual review by MSCI in June, regulators have launched a revamp of the country’s capital markets, including plans to widen access to the currency market while also floating options to lift a short-selling ban. The reforms are intended to convince MSCI that Asia’s fourth-largest economy deserves a spot among the 23 developed countries, which are meant to embody what money managers expect of mature capital markets.