Korea and MSCI Developed Market Status: Watch List, Reforms, Timeline
Start here · Guide 10 of 10
No — as of October 2026, MSCI still classifies South Korea as an Emerging Market, and Korea is not on MSCI’s list of markets under review for an upgrade (often called the “watch list”). MSCI declined to add Korea in its June 2024, June 2025 and June 2026 reviews, pointing above all to the lack of an offshore market where the won can be delivered. FTSE Russell and S&P Dow Jones Indices, by contrast, already treat Korea as a Developed market.
In short
- Korea has been in the MSCI Emerging Markets index since 1992. It sat on the watch list from 2008 to 2014 and has not been back since.
- In June 2026 MSCI acknowledged Korea’s reforms but said investors still see the core problems as unresolved: no offshore delivery of the won, thin overnight FX liquidity, little use of omnibus accounts, and heavy short-selling compliance and pre-settlement funding burdens.
- MSCI’s June 2026 accessibility scorecard rated Korea “improvements needed” on 5 of its 18 measures, down from 6 in 2025.
- Reforms continue: 24-hour onshore won trading started on July 6, 2026, and an offshore won settlement system is planned for 2027.
- The earliest realistic path is a watch-list addition in June 2027, a decision in 2028 and index inclusion around mid-2029.
What is MSCI market classification?
MSCI, the index company, sorts every market into Developed, Emerging, Frontier or Standalone. Funds that track the MSCI World index (developed markets) or the MSCI Emerging Markets index buy a country’s stocks only if the country sits in that universe. Classification therefore decides which pools of index-linked money a market can reach.
MSCI uses three criteria: economic development (used only to decide Developed status), size and liquidity (enough companies meeting index size rules), and market accessibility. Accessibility is judged on 18 measures grouped into five areas: openness to foreign ownership, ease of capital inflows and outflows, efficiency of the operational framework, availability of investment instruments, and stability of the institutional framework. The ratings rest largely on feedback from asset managers, asset owners, brokers, custodians, exchanges and regulators.
Every June MSCI publishes its Global Market Accessibility Review and then its Annual Market Classification Review, which names any markets under review for reclassification. MSCI says it upgrades a market only if the change can be seen as irreversible. A reclassification consultation also requires that all issues have been addressed, reforms are fully implemented, and investors have had time to judge whether they work. Timelines vary: for Greece, MSCI launched a consultation on January 26, 2026, decided on March 31, 2026, and will move Greece to Developed status at the May 2027 index review.
Is South Korea a developed market? It depends on the index provider
| Index provider | Korea’s status (Oct 2026) | Notes |
|---|---|---|
| MSCI | Emerging | In MSCI EM since 1992; on the watch list 2008–2014; second-largest country in MSCI EM at 21.4% (Sep 30, 2026), behind Taiwan at 28.9% |
| FTSE Russell | Developed | Reconfirmed in its October 6, 2026 annual announcement; still monitoring settlement funding, KRX market-warning lists and short selling |
| S&P Dow Jones Indices | Developed | Classified as developed since 2001 |
The split matters in practice. A global emerging-markets fund benchmarked to MSCI holds a large slice of Korea — Samsung Electronics (7.55%) and SK hynix (5.90%) were the second- and third-largest stocks in MSCI EM on September 30, 2026, after TSMC. (How those two dominate Korea’s own market is explained in KOSPI vs KOSDAQ.) A fund that follows FTSE’s emerging-markets index holds no Korean stocks, because FTSE counts Korea as developed. For US-listed ways to own Korea, see Korean stocks and ETFs in the US.
Korea’s history with MSCI
Korea joined the MSCI Emerging Markets index in 1992. From 2008 to 2014 MSCI consulted investors on moving Korea to Developed status, then dropped it from the review list in 2014.
In each of its 2024–2026 statements, MSCI recalled the problems investors raised during that consultation. The main barrier was the limited convertibility of the won outside Korea. Others were a rigid investor ID system that made in-kind transfers and off-exchange deals cumbersome, and KRX (Korea Exchange) restrictions on using exchange data to create financial products such as index futures and ETFs abroad.
What does MSCI want Korea to fix?
MSCI’s June 2026 accessibility review (based on data to May 31, 2026) rated Korea on a three-step scale: “++” no issues, “+” no major issues, and “−” improvements needed. Korea scored “++” or “+” on 13 measures, including trading, custody and stock lending. The table shows the measures that matter most.
| MSCI measure | 2026 rating | Where things stand |
|---|---|---|
| Foreign exchange market liberalisation | − | The won still cannot be delivered offshore. Registered foreign institutions (RFIs) have traded onshore since January 2024, and onshore hours ran to 2 a.m. from July 2024 and around the clock on weekdays from July 6, 2026. Offshore won settlement institutions are planned, with full launch targeted for 2027. |
| Investor registration & account set-up | − | The investment registration certificate (IRC) was abolished on December 14, 2023; companies now use an LEI (Legal Entity Identifier) and individuals a passport number. Old and new IDs still coexist, which MSCI says creates friction and limits omnibus accounts. |
| Clearing & settlement | − | Settlement is still mostly per investor ID; omnibus accounts are allowed but little used. KSD (Korea Securities Depository) cut pre-settlement funding amounts, but MSCI says the funding calculation remains unclear. |
| Transferability | − | In-kind transfers and off-exchange trades have been allowed with restrictions since the 2023 reforms but are not yet common. |
| Information flow | − | Mandatory English disclosure is being phased in: phase two began in May 2026, and phase three in 2027 is to cover all KOSPI companies. Adoption of the new dividend procedure is partial. |
| Short selling | + | Allowed with restrictions since the ban ended on March 31, 2025, but MSCI notes significant compliance burden and operational friction. |
| Availability of investment instruments | + (up from −) | Upgraded in 2026 because derivatives on Korean indexes now trade on international exchanges; some exchange-data restrictions persist. |
MSCI’s Korea assessment does not deal with issues such as low dividend payouts or governance; those are the target of other policies covered in our guides to the Korea discount and the Value-up programme.
What reforms has Korea made since 2023?
- January–February 2023: The FSC (Financial Services Commission) announced capital-market access reforms, and the Ministry of Economy and Finance (MOEF) announced an FX market restructuring plan.
- December 14, 2023: The IRC requirement ended; reporting rules for foreign brokers’ omnibus accounts were relaxed; more over-the-counter trades by foreigners became eligible for after-the-fact reporting.
- January 2024: RFIs gained access to the onshore interbank FX market, and mandatory English disclosure began for a first group of large listed companies (selected by assets and foreign ownership).
- 2024: A new dividend procedure let companies announce the dividend before the record date; MSCI said only a minority of companies adopted it at first.
- July 2024: Onshore won trading was extended to 2 a.m. KST.
- March 31, 2025: Short selling fully resumed after a ban imposed in November 2023, alongside a new system to detect naked short selling. See our short selling guide.
- January 9, 2026: The government published a roadmap for MSCI Developed Market inclusion covering eight areas, from the FX market and settlement to short-selling rules, English disclosure and index licensing.
- May 2026: Phase two of mandatory English disclosure began.
- July 6, 2026: Onshore dollar-won trading moved to a near-24-hour schedule, from 6 a.m. Monday to 6 a.m. Saturday KST.
- Planned for 2027: Full launch of offshore won settlement (reports point to January 2027 for the settlement network) and phase three of English disclosure.
FX hours for stock investors are covered in our market hours guide.
What did MSCI say in June 2024, June 2025 and June 2026?
In all three annual reviews, MSCI kept Korea in Emerging Markets and did not add it to the list of markets under review for reclassification.
June 2024: short-selling ban counted against Korea
In its review announced on June 20, 2024, MSCI welcomed the FX reforms, the switch from IRCs to LEIs, English disclosure and the dividend procedure changes. It added that market participants found the LEI process complex and that few companies had adopted the dividend changes. The new negative was the full short-selling ban of November 2023: MSCI expected it to be temporary but warned that sudden rule changes are undesirable. It also noted that the reforms did not address limits on using exchange data.
June 2025: watching whether reforms actually work
On June 24, 2025, MSCI said it would keep monitoring how Korea’s measures were implemented and adopted in practice. It wanted to see whether they reproduce what fully functioning offshore FX markets deliver in developed markets. It questioned whether longer onshore trading hours, a practice no developed market uses, would be enough. It also said omnibus accounts and OTC reporting changes were not yet widely used and that registration problems persisted. Short selling had resumed on March 31, 2025, but investors worried about compliance burden and abrupt rule changes. Korea was rated “improvements needed” on 6 of 18 measures, down from 7 a year earlier.
June 2026: reforms acknowledged, core issues unresolved
MSCI published its 2026 decision on June 23, 2026 (New York time; the morning of June 24 in Seoul). It acknowledged the measures but said investors felt the underlying issues had not been fully resolved. Its most specific line was blunt: “The Korean won is not deliverable offshore.” MSCI added that liquidity during the extended onshore FX hours was largely insufficient for tight execution, and that investors needed convincing that overnight won trading would develop deep liquidity and tight spreads. It also cited limited use of omnibus accounts and in-kind transfers, compliance burdens after the short-selling ban ended, and early pre-settlement funding requirements.
The finance ministry and the FSC responded in a joint statement that they expected Korea to be included if reforms continued on schedule. Note that the 24-hour won market started only on July 6, 2026, after the review.
What would an MSCI upgrade mean for foreign flows?
An upgrade would turn Korea from a heavyweight into a minor weight. On September 30, 2026, the MSCI EM index had a free-float market value of about USD 12.3 trillion, of which Korea was 21.4%, or roughly USD 2.6 trillion. The MSCI World index was about USD 90.4 trillion. By the author’s rough arithmetic, Korea would be under 3% of an enlarged World index — before allowing for the higher size cut-offs in developed markets. Emerging-market funds would sell Korean stocks; developed-market funds would buy.
Brokers have published estimates of passive (index-fund) flows. They are estimates by securities firms, not MSCI figures, and rest on different assumptions (USD figures as reported by each source):
- UBS (June 2025): up to KRW 34 trillion (USD 24 billion) of passive inflows.
- BNP Paribas (cited June 2026): about USD 30 billion of passive inflows.
- NH Investment & Securities (June 2026): about KRW 44 trillion (USD 29.2 billion) of passive inflows, but it also warned of possible passive outflows of about KRW 8 trillion (USD 5.2 billion) around an eventual inclusion announcement, because emerging-market funds have grown and developed-market size thresholds are higher.
Not everyone thinks an upgrade would help. CLSA’s Alexander Redman argued in June 2026 that inclusion would force selling by emerging-market funds and questioned whether developed-market funds would buy much beyond semiconductors. Daily foreign buying and selling is tracked on our foreign investor flows page.
Korea and MSCI: timeline
| Date | Event |
|---|---|
| 1992 | Korea included in the MSCI Emerging Markets index |
| 2001 | S&P Dow Jones Indices classifies Korea as developed |
| 2008–2014 | Korea on MSCI’s review list for a possible upgrade; removed in 2014 |
| Nov 2023 – Mar 30, 2025 | Full short-selling ban |
| Dec 14, 2023 | IRC requirement abolished; LEI or passport used instead |
| Jun 20, 2024 | MSCI review: not added; short-selling ban flagged |
| Jun 24, 2025 | MSCI review: not added; 6 of 18 measures “improvements needed” |
| Jan 9, 2026 | Government roadmap for MSCI Developed Market inclusion |
| June 2026 | MSCI accessibility review: 5 of 18 measures “improvements needed” |
| Jun 23, 2026 (Jun 24 KST) | MSCI review: not added; won not deliverable offshore cited |
| Jul 6, 2026 | Near-24-hour onshore dollar-won trading begins |
| Oct 6, 2026 | FTSE Russell keeps Korea at Developed, with ongoing monitoring |
| 2027 (planned) | Offshore won settlement and English disclosure for all KOSPI companies |
| June 2027 (expected) | Next MSCI accessibility and classification reviews; earliest chance to rejoin the watch list |
| 2028 / 2029 (earliest) | Possible reclassification decision in 2028, with inclusion around late May 2029, if Korea is added in 2027 |
What to watch before the June 2027 review
- Overnight won liquidity: whether the 24-hour onshore market develops tight spreads outside Seoul business hours.
- Offshore won settlement: whether foreign institutions can actually hold and settle won offshore, as planned for 2027.
- Omnibus accounts and IDs: whether global custodians and asset managers use omnibus structures and the LEI system in practice.
- Short-selling compliance and pre-funding: whether rules become simpler for foreign institutions.
- Index and data licensing: whether more products on Korean indexes list abroad.
For how foreigners access the market today, see how to buy Korean stocks.
Note: “Watch list” is shorthand; MSCI’s term is the list of markets under review for potential reclassification. Statuses here are as of October 15, 2026. MSCI can make off-cycle announcements, and the government’s reform schedule has shifted before, so check MSCI’s market classification page and the finance ministry and FSC releases for updates.
Frequently asked questions
Is South Korea a developed or an emerging market?
It depends on the index provider. MSCI classifies Korea as an Emerging Market, while FTSE Russell and S&P Dow Jones Indices classify it as Developed. FTSE reconfirmed Korea's Developed status in its October 6, 2026 announcement.
What is the MSCI watch list?
It is the informal name for MSCI's list of markets under review for potential reclassification, announced each June. A market normally stays on the list for at least a year while MSCI consults investors before any decision. Korea was on it from 2008 to 2014 and has not been re-added since.
Why did MSCI not add Korea to the watch list in June 2026?
MSCI acknowledged the reforms but said investors felt the underlying issues were not fully resolved. It cited the won not being deliverable offshore, thin liquidity in extended FX trading hours, limited use of omnibus accounts and in-kind transfers, short-selling compliance burdens and pre-settlement funding requirements.
When is the next MSCI market classification review?
MSCI announces its annual market classification results each June, after its Global Market Accessibility Review. The next review is expected in June 2027; the exact date had not been confirmed in the sources reviewed as of October 15, 2026.
Did the 24-hour won market fix MSCI's FX concerns?
It is too early to say. Near-24-hour onshore dollar-won trading began on July 6, 2026, after MSCI's June 2026 review, which had criticised thin liquidity in extended hours. MSCI is expected to judge how the new market works in its next review cycle.
How much money could flow into Korea if MSCI upgrades it?
Estimates vary and are not MSCI figures. UBS estimated up to KRW 34 trillion (about USD 24 billion) of passive inflows in 2025, while NH Investment & Securities estimated about KRW 44 trillion in 2026 but also warned of possible passive outflows around an eventual inclusion announcement.
Last reviewed: October 15, 2026.
Sources
- Results of the MSCI 2026 Market Classification Review, MSCI, June 23, 2026
- 2026 Global Market Accessibility Review, MSCI, June 2026
- MSCI Announces Results of the MSCI 2025 Market Classification Review, MSCI, June 24, 2025
- MSCI Announces Results of the MSCI 2024 Market Classification Review, MSCI, June 20, 2024
- MSCI Emerging Markets Index (USD) factsheet, MSCI, September 30, 2026
- MSCI World Index (USD) factsheet, MSCI, September 30, 2026
- FTSE Equity Country Classification — September 2026 Annual Announcement, FTSE Russell, October 6, 2026
- Is South Korea Crowding Your Emerging Markets Allocation?, S&P Dow Jones Indices, November 2020
- Investing in Domestic Capital Markets Made Easier for Foreign Investors, Financial Services Commission, December 13, 2023
- 24-Hour FX Market to Open in July… Accelerating Push for MSCI Developed Index Inclusion, The Asia Business Daily, January 9, 2026
- South Korea launches 24-hour foreign exchange trading to boost won’s global appeal, Korea JoongAng Daily, July 6, 2026
- MSCI keeps Korea in emerging markets, delays developed market upgrade bid, Korea JoongAng Daily, June 24, 2026
- MSCI keeps Korea off developed market watchlist, but global analysts stay bullish, The Korea Times, June 24, 2026
- If Added to MSCI Watch List, Korean Stock Market Expected to See 44 Trillion Won Inflow, The Asia Business Daily, June 18, 2026
- MSCI maintains S.Korea’s emerging-market status; level playing field eyed, KED Global, June 25, 2025
This guide explains how the Korean market works for general information. It is not investment, legal or tax advice; rules change, so check the official sources listed above or a qualified adviser before acting.