Extra! Korea

June 23, 2010

Morgan Stanley Capital International: South Korea, you’re NOT “developed”

Filed under: economics — extrakorea @ 4:38 am

Morgan Stanley Capital International (MSCI) has refused to upgrade South Korea’s classification from “emerging market” to “developed market” for the second consecutive year in a row. Ouch. Why not?

MSCI said that there was a lack of an active offshore market for the Korean won and limited trading hours of the onshore spot currency market, which meant that investors had to pre-fund trades.

MSCI also cited the “rigidity” of the Korean market’s investor identification system as well as anti-competitive practices in provision of stock market data.

The latter complaint refers to a demand by MSCI that the Korea Exchange should ease regulations on the use of the Kospi 200 index to allow the creation of derivatives that would allow foreign investors to trade when the Korean market is closed at night.

Under existing regulations, KRX’s permission must be given in order to list the derivatives in other overseas exchange markets.

Obviously, they do not understand Korea’s unique situation.

Korea Exchange chief Kim Bong-soo in a recent newspaper interview threatened to file a lawsuit against MSCI for using the local market data without permission.

More legal action nonsense. I might have to add a category.

Although some analysts said the exclusion of Korea from the developed market index represented a blow to the nation’s ambitions to become a financial hub, others took a more sanguine view.

There’s the h-word again. Hub of finance and the m-word of ridiculous lawsuits.

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