beyondbrics

Sure enough, MSCI held fire on S Korea and Taiwan, deciding not to upgrade them from emerging to developed market status in its annual review of country classifications.

Here’s their explanation as to why.

Accessibility issues in both markets, in particular the lack of full currency convertibility, including the absence of active offshore currency markets, and issues linked to the rigidity of the ID systems, remain unchanged from the view of international institutional investors.

In Korea, MSCI notes that some measures have been put in place in an attempt to alleviate frictions and inefficiencies resulting from the lack of full currency convertibility and the ID system. Examples are the revision of the Banking Act to provide foreign investors additional funding options for securities settlement purposes, the adjustment of currency market settlement timing, the use of lead IRC accounts for block trading and the endorsement of an in‐ kind transfer principle.

However, feedback from investors indicated that their actual experience has seen limited improvement as administrative constraints attached to these measures make them of limited effectiveness in practice. In addition, anti‐competitive practices have not been eliminated: the provision of stock market data continues to be subject to contractual anti‐ competitive clauses.

On a positive note for Taiwan, pre‐funding practices, while not completely eliminated, are now less severe following the implementation of a T+2 DVP settlement cycle.

The index provider decided also to take no action on the MSCI Qatar Index or the MSCI UAE Index, both of which were on review for upgrade from frontier to emerging status. Those reviews were extended until December, “to give additional time for market participants to assess the impact of the recent positive changes implemented in these two markets”.

Maybe next time…

Related reading:
S Korea: Us, developed? No thanks, beyondbrics
Qatar and UAE: upgrade prospects dim, beyondbrics