MSCI Keeps South Korea Off 2026 Watch List as Won Trading Curbs Block DM Bid

Q: What is the single biggest barrier preventing South Korea's $5 trillion market from developed status?

The biggest obstacle is South Korea’s foreign-exchange regime, especially the limited offshore convertibility of the won and related FX trading restrictions. MSCI’s repeated concern is not South Korea’s economic size or stock-market liquidity, but market accessibility for global institutional investors. In its latest review, MSCI pointed to the won’s limited convertibility in offshore markets and insufficient onshore liquidity during extended FX trading hours as falling short of developed-market standards. Those restrictions make it harder and costlier for foreign investors to move money in and out efficiently and hedge currency risk. Other issues remain, including compliance burdens tied to the restored short-selling regime, limited use of omnibus accounts and in-kind transfers, and pre-settlement funding requirements. But the FX issue is the central sticking point and the one most consistently cited over the years. That is why recent reforms, while positive, were not enough for an upgrade. MSCI’s position is that reforms must not only be announced but also fully implemented and shown to work durably in practice before South Korea can be considered for developed-market status.

3 articles · Updated · 매일경제 · Jun 23

South Korea was excluded again from MSCI’s developed-market watch list in the 2026 annual classification, leaving it in the emerging-markets index alongside China and India.
MSCI said investor feedback still points to unresolved structural barriers, with the biggest obstacle being foreign-exchange access because the won cannot be delivered offshore and night trading still lacks liquidity.
Short-selling rules also weighed on the review, with MSCI saying the fully resumed market still imposes significant operational burdens under the new monitoring regime.
The miss delays Seoul’s upgrade path: the next chance to enter the watch list is June 2027, with possible index inclusion in June 2028 and actual entry by May 2029.