(2nd LD) South Korea will press for developed market status MSCI: Minister
(ATTN: UPDATES with more details in paragraphs 8, 10-12)
LONDON / SEOUL, Nov. 02 (Yonhap) – South Korea plans to step up efforts to secure developed market status with Morgan Stanley Capital International (MSCI), the finance minister said, as the it is expected that a possible upgrade could help dispel the undervaluation of the Korean stock market.
Finance Minister Hong Nam-ki made the remarks Monday (local time) in London during a session on global investor relations to explain his country’s economic situation.
Hong said the government will make efforts to earn MSIC’s developed market status, as the global index provider will have its annual review in June of next year. South Korea remained on the list of emerging markets.
âIn light of the state of the Korean economy and the views of foreign investors on Korea, the government believes that South Korea deserves to gain developed market status,â Hong said.
He said the possible upgrade would help to strengthen the stability of the Korean stock market and dispel the so-called Korea Discount, the undervaluation of the Korean stock market due to geopolitical risks.
In June, MSCI again ranked the Korean stock exchange among the countries on the emerging market list.
To transition to developed market status, a country must first be placed on the watch list for at least one year. In 2008, Korea was placed on such a list but was not granted status later.
South Korea has even been banned from the watch list since 2014. MSCI cited the lack of an offshore currency market for the Korean currency as one of the main reasons for its decision to keep South Korea in. the emerging markets category.
The government said that the convertibility of Korean currency into other currencies has been greatly improved compared to the past, with the won becoming one of the most traded currencies.
Trading in the offshore undeliverable futures (NDF) market remains high, allowing foreign investors to effectively engage in foreign exchange trading for 24 hours, he said.
If South Korea is included in MSCI’s list of developed markets, up to 61 trillion won ($ 52 billion) of foreign funds could flow into Korean stock markets, according to a report from the Korea Economic Research Institute.
In 2009, the global stock index compiler Financial Times Stock Exchange (FTSE) elevated South Korea to the developed market category.
Meanwhile, Hong said South Korea will redouble its efforts to minimize the fallout from global supply chain tensions on the Korean economy.
He said the government was exploring measures with companies to produce some of the auto chips in a bid to tackle a global shortage of auto chips.
South Korea’s auto export growth slowed in the third quarter from three months earlier, as a shortage of auto chips led to lower vehicle production.
Car exports rose 4.2 percent year-on-year to $ 9.7 billion in the July-September period, after gaining 71.9 percent in the second quarter, according to customs data. Automobiles accounted for about 7 percent of South Korea’s exports.