Korean stocks are left out of the MSCI Developed Markets for the 15th consecutive year, and regulators are still constrained by the shadow of the 1997 financial crisis

Mars Finance News, July 9 - Despite the continued strength of the South Korean stock market driven by AI chip leaders such as Samsung Electronics and SK Hynix, and the implementation of multiple capital market reforms, MSCI has maintained South Korea's "Emerging Market" classification for the 15th consecutive year. The core reasons remain foreign investment access restrictions and insufficient openness of the offshore Korean won market.

Reports say that South Korean regulators have long worried that relaxing offshore Korean won trading could repeat the capital outflows and sharp won depreciation seen during the 1997 Asian financial crisis, and therefore have never fully relaxed foreign exchange controls. Currently, although South Korea has introduced reforms such as integrated custody accounts and extended Korean won trading hours, won settlement is still limited to the domestic market, and MSCI believes the degree of market openness has not yet met developed market standards.

Institutions point out that if South Korea successfully upgrades to MSCI Developed Market status, it could attract about $30 billion in passive fund inflows. However, South Korea's weight in the developed market index may be only about 3%, lower than its current weight of approximately 24% in the MSCI Emerging Market Index, and small and mid-cap stocks may instead face capital outflow pressure.

Analysts believe that the long-standing "Korea discount" in valuation still needs to be truly addressed through structural reforms such as tax reform, improving shareholder returns, and enhancing corporate governance, rather than relying solely on market classification upgrades.