Investing.com -- South Korea’s stock market is approaching a key milestone as investors await MSCI’s upcoming market classification review, according to a Bloomberg report.
The June 23 review could determine whether South Korea is added to the watchlist for eventual developed-market status.
The anticipation comes after a strong rally in Korean equities this year. The Kospi has surged more than 90%, making it one of the world’s best-performing major stock indexes.
The rally has been driven largely by enthusiasm surrounding artificial intelligence and semiconductor stocks.
Samsung Electronics and SK Hynix together account for more than half of the Kospi’s weighting, making the market increasingly tied to the global AI investment theme.
While many investors expect MSCI to keep South Korea in the emerging-market category for now, several market participants believe an upgrade is only a matter of time.
Analysts cited recent market reforms, including the resumption of short selling and plans to introduce extended trading hours for the Korean won, as steps toward meeting developed-market criteria.
South Korea was removed from MSCI’s developed-market watchlist in 2014 due to concerns over market accessibility and foreign exchange restrictions.
The country has since implemented several reforms aimed at improving access for international investors.
President Lee Jae Myung has also made capital market reform a key policy priority, further strengthening expectations that South Korea could eventually secure developed-market status.
An MSCI upgrade could have meaningful implications for capital flows.
BNP Paribas estimates that inclusion in the developed-market index could attract roughly $30 billion in inflows as benchmark-tracking funds adjust their portfolios.
Some investors argue that the classification matters less than it once did because Korean equities have become increasingly linked to the global semiconductor and AI sectors.
South Korea’s equity market has nearly tripled in value over the past year to approximately $4.4 trillion, briefly overtaking India as the world’s sixth-largest stock market.
The country currently accounts for about 23% of the MSCI Emerging Markets Index, making it one of the benchmark’s largest constituents.
Market participants also say a reclassification could help narrow the longstanding "Korea Discount," a valuation gap that has historically left Korean stocks trading below many developed-market peers.
Investors will now be watching MSCI’s June review for any indication that South Korea is moving closer to joining the developed-market club.