① MSCI released the results of its 2026 Market Classification Review, and South Korea remains classified as an “Emerging Market,” failing to enter the Developed Markets watch list.
② South Korea’s stock market has risen nearly 170% over the past 12 months, but MSCI believes that the limited convertibility of the Korean won in offshore currency markets and the rigid investor identification system in the South Korean equity market are the main obstacles preventing its upgrade to Developed Market status.
June 24 — On Tuesday local time, index provider MSCI released the results of its 2026 Market Classification Review.
In the latest assessment, MSCI still classifies South Korea as an “Emerging Market.” This decision dashed hopes that South Korean equities would be included in the MSCI Developed Markets watch list, a key step before a market can be upgraded to Developed Market classification.
South Korea has long aspired to be included in MSCI’s Developed Markets category. Analysts noted that an upgrade would help alleviate the so-called “Korea discount” problem for South Korean stocks. The term refers to the long-standing issue of South Korean equities generally trading at lower valuations than global peers.
Over the past year, South Korea’s stock market achieved substantial gains driven by strong chip demand amid the AI boom — the KOSPI index rose nearly 170% over the past 12 months, among the strongest performances globally. However, MSCI stated that the limited convertibility of the Korean won in offshore currency markets remains a major obstacle to its reclassification.
MSCI also pointed out that the rigid investor identification system in the South Korean equity market, restrictions on physical transfers and over-the-counter trading, and constraints on investment products due to restrictions on the use of foreign exchange data have all become stumbling blocks hindering an upgrade of South Korea’s stock market.
Although MSCI acknowledged that South Korean authorities have announced measures to address the above issues, the company said: “Investors have indicated that the fundamental issues have not been fully resolved.”
South Korea is preparing to launch 24-hour trading in the USD/KRW spot market on July 6, the latest move in its efforts to open its foreign exchange market to overseas investors.
Regarding MSCI’s latest decision, South Korea’s Ministry of Economy and Finance said it will continue to advance reforms aimed at achieving an upgrade. The ministry stated:
“If we continue to advance foreign exchange and capital market reforms at our own pace, we believe we will be able to join the ranks of developed countries.”
