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(2nd LD) S. Korea to push for efforts to win MSCI developed market status: minister

All News 15:55 November 02, 2021

(ATTN: UPDATES with more details in paras 8, 10-12)

LONDON/SEOUL, Nov. 2 (Yonhap) -- South Korea plans to again push to win developed market status from Morgan Stanley Capital International (MSCI), the finance minister has said, amid expectations 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 at an investor relations session with global investors to explain his country's economic situations.

Hong said the government will make efforts to win the MSIC's developed market status as the global index provider will have its annual review in June next year. South Korea has remained on the list of emerging markets.

"In light of the Korean economy's situations and foreign investors' views about Korea, the government thinks South Korea deserves to win the developed market status," Hong said.

He said the possible upgrade will help boost stability in the Korean stock market and dispel the so-called Korea Discount, the undervaluation of the Korean stock market due to geopolitical risks.

Finance Minister Hong Nam-ki holds an investor relations session in London to explain South Korea's economic situations on Nov. 1, 2021. (Yonhap)

Finance Minister Hong Nam-ki holds an investor relations session in London to explain South Korea's economic situations on Nov. 1, 2021. (Yonhap)

In June, MSCI again classified the Korean stock market as a country on the list of emerging markets.

For the upgrade to the developed market status, a country should be first placed on the watch list for at least one year. In 2008, Korea was placed on such a list but failed to be granted the status later.

South Korea has been even excluded from the watch list since 2014. MSCI cited the absence of an offshore currency market for the Korean currency as one of the main reasons for its decision to retain South Korea in the emerging market category.

The government said the Korean currency's convertibility into other currencies has been sharply enhanced compared with the past as the won has become one of the highly traded currencies.

Trading in the offshore non-deliverable forward (NDF) market remains high, which enables foreign investors to effectively engage in foreign exchange trading for 24 hours, it said.

If South Korea is included in MSCI's developed market list, up to 61 trillion won (US$52 billion) worth of foreign funds could flow into the Korean stock markets, according to a report by the Korea Economic Research Institute.

In 2009, global equity index compiler Financial Times Stock Exchange (FTSE) upgraded South Korea into the developed market category.

Meanwhile, Hong said South Korea will pump up efforts to minimize the fallout from global supply chain strains on the Korean economy.

He said the government is exploring measures with companies to produce part of auto chips in a bid to tackle a global shortage of automobile chips.

The growth of South Korea's exports of autos slowed in the third quarter from three months earlier as the shortage of auto chips dented vehicle output.

Exports of cars rose 4.2 percent on-year to $9.7 billion in the July-September period, slowing from a 71.9 percent gain in the second quarter, according to customs data. Autos accounted for some 7 percent of South Korea's exports.


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