MSCI Inc has indicated that South Korea has yet to resolve several key barriers faced by foreign investors in its latest market accessibility assessment.
This represents a setback for global funds and the South Korean government, which had hoped its reform efforts would pave the way for an eventual upgrade of its market to developed status.
In its annual review released on Friday, MSCI acknowledged progress in South Korea's reform initiatives, including plans to establish a 24-hour foreign exchange market and broader measures to improve investor access.
However, the New York-based index provider stated that the absence of a fully deliverable offshore Korean won market and persistent inefficiencies in the settlement of short sales continue to hinder the market's accessibility.
MSCI Inc noted that, although South Korea lifted its short-selling ban in early 2025, "operational friction has emerged, and optimization of operational processes and infrastructure is ongoing."
Furthermore, "a lack of clarity in the calculation method for financing amounts has resulted in inefficient settlement processes."
This assessment offers an early glimpse into the annual market classification results that MSCI will announce on June 23.
South Korea's benchmark stock index has more than doubled this year, driven by an AI boom that has propelled chipmakers like Samsung Electronics and SK Hynix to sustained gains.
The Kospi's rally also reflects market optimism regarding President Lee Jae-myung's push for corporate governance reforms, which aim to reduce the country's longstanding "Korea discount" in equity valuations.
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