Key facts
- South Korea's Kospi has surged over 90% this year, becoming the world's best-performing major equity benchmark.
- Investors await MSCI Inc.'s June 23 review for potential developed-market watchlist inclusion.
- Most analysts expect Korea to remain an emerging market, citing the need for reforms to prove durability.
- Korea's market is heavily influenced by AI trade, with Samsung Electronics and SK Hynix holding significant weight.
- A potential MSCI upgrade could attract around $30 billion in inflows.
- Recent reforms include resuming short selling and preparing for extended won trading hours.
South Korea's stock market, the Kospi, has experienced a remarkable surge this year, making it the world's best-performing major equity benchmark. This rally, largely driven by investor enthusiasm for artificial-intelligence related companies like Samsung Electronics and SK Hynix, has also led to significant market volatility. Investors are now closely watching for MSCI Inc.'s annual market-classification review on June 23, where a decision will be made on whether Korea will be placed on the watchlist for a potential upgrade to developed-market status.
While most market participants anticipate that Korea will remain classified as an emerging market for the time being, they acknowledge the ongoing reforms and the country's critical role in global supply chains, particularly in semiconductors, as factors pushing towards eventual reclassification. Historically, MSCI has cited issues with currency trading restrictions and market access as reasons for Korea's continued emerging market status, but recent efforts such as resuming short selling and extending won trading hours aim to address these concerns.
Despite the classification debate, some argue that Korea's deep integration into global AI and technology plays diminishes the impact of any benchmark classification.