By Lee Kyung-min
Market watchers are paying eager consideration as as to if Korea shall be included subsequent week within the World Authorities Bond Index (WGBI), a worldwide benchmark for the sovereign revenue market.
The index shall be introduced on Oct. 8 by the London-based Monetary Instances Inventory Change (FTSE) Russell, a worldwide index supplier. The market capitalization-weighted bond index consists of the federal government bond markets of a number of economies.
Additionally drawing consideration is whether or not the nation shall be labeled as a watch record nation, a grounds for delisting from the FTSE index. At difficulty is Korea’s quick promoting ban. The overarching ban shall be lifted late subsequent March, with solely a ban remaining on bare quick promoting, as revised by the Nationwide Meeting.
The FTSE index classifies the Korean fairness market as developed, not like Morgan Stanley Capital Worldwide (MSCI), which nonetheless classifies it as an rising market. U.S. funds observe MSCI indexes, whereas European funds do FTSE indexes.
In keeping with market sources, Korea’s potential inclusion within the WGBI this 12 months will comply with three earlier failed makes an attempt.
Between six months and a full 12 months shall be wanted thereafter for the total inclusion. About $50 billion (65 trillion received) of funding funds will discover its approach into the Korean bond market.
Many count on inclusion to be a robust chance, given about two years have handed since Korea was placed on the watch record in September 2022.
Additional fueling optimism is the required institutional frameworks established to bolster bond market accessibility, a key inclusion criterion.
Additionally at play is international investor sentiment, as surveyed by the index tracker.
The inclusion could be postponed but once more if survey respondents say the nation’s market accessibility falls wanting international requirements.
HSBC, a worldwide banking powerhouse, advocates for Korea’s inclusion, as underpinned by the prospect of upgrades in its market accessibility score.
Aside from the sovereign index, investor pursuits prolong to the resumption of quick promoting within the context of Korea making the MSCI itemizing.
Monetary Providers Fee Vice Chairman Kim So-young stated final December that eliminating bare quick promoting is a job way more urgent than the nation making the MSCI World record.
The 2 main points shall be pursued underneath the long-term aim of advancing the nation’s monetary system, however MSCI itemizing shall be at finest a “lucky byproduct” of Korea’s capital market system improve, he stated.
“Our aim is to advertise wholesome positive factors for traders, who then will assist listed corporations with their working funds. This, in flip, will energy the expansion of the industries and the economic system in a virtuous cycle. These are our goals,” he stated on the time.
Korea banned quick promoting on Nov. 6 final 12 months, prompted by circumstances of BNP Paribas and HSBC partaking in unlawful bare quick promoting value a mixed 56 billion received.
