There are hidden risks in MSCI upgrade of South Korea to the developed market. Foreign investors might sell more Korean companies than buying them as was initially expected by government. Shareholder pool will be more concentrated focused on Korean retail investors or funds that invest in Korean companies with less foreign participation. This could especially be the case for smaller and medium-sized companies in South Korea if the MSCI upgrades.
South Korea’s stock market is one of the largest in Asia. The nation is home to huge conglomerates including Samsung and Hyundai. And yet Korea is still listed as an emerging market — not a developed one — by MSCI, the investment research firm that provides influential market indexes. Korea argues it should be elevated to MSCI’s World Index, where it would sit alongside the US, UK, Germany and other developed economic powers. The company is expected to decide this month.
Bloomberg’s Youkyung Lee and Henry Ren join this episode to talk about why this move matters so much to South Korea — and why some companies and market watchers are having second thoughts about whether such a move is a good idea — or even worth it.
Read more: Why Bringing a $1.8 Trillion Stock Market to the Big Leagues Could Backfire
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