ID :
20089
Thu, 09/18/2008 - 22:45
Auther :
Shortlink :
http://m.oananews.org//node/20089
The shortlink copeid
FTSE upgrades S. Korea to developed market status
(ATTN: UPDATES with market close at para 9)
SEOUL, Sept. 18 (Yonhap) -- Global equity index compiler Financial Times Stock Exchange (FTSE) confirmed Thursday it has decided to upgrade South Korea into the
developed market category for the first time, a move which could help attract
more foreign investment.
South Korea, which was classified as one of seven advanced emerging markets, has
been on a watch list for upgrade to developed market status along with Taiwan
since September 2004. The promotion of South Korea will be implemented in
September 2009.
"Now the Korean market meets the same and consistent standards as other developed
markets," Mark Makepeace, FTSE's chief executive officer, told a press
conference, explaining the reason for the upgrade.
FTSE, which covers 47 countries, classifies markets into four categories --
developed, advanced emerging, secondary emerging and frontier markets.
The FTSE global stock benchmark indexes are tracked by international funds mainly
composed of European capital worth about US$3 trillion. According to analysts,
the upgrade would prompt investors to see the Seoul bourse more favorably and
help dispel the so-called 'Korea Discount' phenomenon.
Since the 1997-98 Asian financial crisis, foreign investors have perceived that
South Korean stocks are trading at a discounted value compared with other Asian
markets because of opaque management and unfriendly shareholder practices by the
nation's family-run conglomerates.
"The promotion is positive for the South Korean stock market in the long term. I
think now the possibility that South Korea will also be included in the developed
market segment by Morgan Stanley Capital International (MSCI) is becoming
greater," said Lee Sun-yup, an analyst at Goodmorning Shinhan Securities Co. "But
I think any meaningful inflow of foreign capital can be expected only after the
global stock markets stabilize."
U.S.-based MSCI is another key global equity index compiler along with FTSE.
Since July, MSCI, whose indexes are estimated to be tracked by funds worth about
$3.5 trillion, has been reviewing whether to promote South Korea to developed
market status.
Despite the news, South Korea's key stock index closed 2.3 percent lower at
1,392.42 on renewed fears about a credit crunch.
According to FTSE, South Korea fully met requirements regarding rules about stock
lending and block trade and free delivery. There has also been some advancement
in terms of off-exchange transactions and changes in foreign exchange markets,
the chief executive said.
"Progress has been made in those two areas. We are satisfied that there has been
sufficient progress, but we are still recommending to Korean regulators that they
continue to make progress in those areas," Makepeace said.
But Makepeace said South Korea needs to improve the offshore foreign exchange
market for the Korean won. "We think (due to) the inclusion of South Korea in the
developed market segment, there will be strong demand from overseas for such a
facility to be made available by international banks."
FTSE said last year that if South Korea eased restrictions on foreign exchange
transactions to give further access and freedom to international investors, the
country would be upgraded to developed market status in 2009.
South Korea's bourse operator, the Korea Exchange (KRX), said it expects a net
capital inflow of up to $16 billion into South Korea in the mid-and long- term
after portfolio readjustments by global investors are completed.
Makepeace said that through the update, about 2 percent out of the roughly $3
trillion of funds tracking the FTSE indexes is expected to flow to South Korea.
He said South Korean stocks will represent some 2 percent of the developed market
portfolios. According to the KRX, South Korea's weight in the FTSE's advanced
emerging markets was 14.5 percent as of July.
Meanwhile, FTSE maintained its classification of Taiwan as an advanced emerging
market for a possible upgrade to the developed market status. It added that red
chip stocks included in the Hong Kong market, which has developed market status,
will be moved to China in the secondary emerging category.
SEOUL, Sept. 18 (Yonhap) -- Global equity index compiler Financial Times Stock Exchange (FTSE) confirmed Thursday it has decided to upgrade South Korea into the
developed market category for the first time, a move which could help attract
more foreign investment.
South Korea, which was classified as one of seven advanced emerging markets, has
been on a watch list for upgrade to developed market status along with Taiwan
since September 2004. The promotion of South Korea will be implemented in
September 2009.
"Now the Korean market meets the same and consistent standards as other developed
markets," Mark Makepeace, FTSE's chief executive officer, told a press
conference, explaining the reason for the upgrade.
FTSE, which covers 47 countries, classifies markets into four categories --
developed, advanced emerging, secondary emerging and frontier markets.
The FTSE global stock benchmark indexes are tracked by international funds mainly
composed of European capital worth about US$3 trillion. According to analysts,
the upgrade would prompt investors to see the Seoul bourse more favorably and
help dispel the so-called 'Korea Discount' phenomenon.
Since the 1997-98 Asian financial crisis, foreign investors have perceived that
South Korean stocks are trading at a discounted value compared with other Asian
markets because of opaque management and unfriendly shareholder practices by the
nation's family-run conglomerates.
"The promotion is positive for the South Korean stock market in the long term. I
think now the possibility that South Korea will also be included in the developed
market segment by Morgan Stanley Capital International (MSCI) is becoming
greater," said Lee Sun-yup, an analyst at Goodmorning Shinhan Securities Co. "But
I think any meaningful inflow of foreign capital can be expected only after the
global stock markets stabilize."
U.S.-based MSCI is another key global equity index compiler along with FTSE.
Since July, MSCI, whose indexes are estimated to be tracked by funds worth about
$3.5 trillion, has been reviewing whether to promote South Korea to developed
market status.
Despite the news, South Korea's key stock index closed 2.3 percent lower at
1,392.42 on renewed fears about a credit crunch.
According to FTSE, South Korea fully met requirements regarding rules about stock
lending and block trade and free delivery. There has also been some advancement
in terms of off-exchange transactions and changes in foreign exchange markets,
the chief executive said.
"Progress has been made in those two areas. We are satisfied that there has been
sufficient progress, but we are still recommending to Korean regulators that they
continue to make progress in those areas," Makepeace said.
But Makepeace said South Korea needs to improve the offshore foreign exchange
market for the Korean won. "We think (due to) the inclusion of South Korea in the
developed market segment, there will be strong demand from overseas for such a
facility to be made available by international banks."
FTSE said last year that if South Korea eased restrictions on foreign exchange
transactions to give further access and freedom to international investors, the
country would be upgraded to developed market status in 2009.
South Korea's bourse operator, the Korea Exchange (KRX), said it expects a net
capital inflow of up to $16 billion into South Korea in the mid-and long- term
after portfolio readjustments by global investors are completed.
Makepeace said that through the update, about 2 percent out of the roughly $3
trillion of funds tracking the FTSE indexes is expected to flow to South Korea.
He said South Korean stocks will represent some 2 percent of the developed market
portfolios. According to the KRX, South Korea's weight in the FTSE's advanced
emerging markets was 14.5 percent as of July.
Meanwhile, FTSE maintained its classification of Taiwan as an advanced emerging
market for a possible upgrade to the developed market status. It added that red
chip stocks included in the Hong Kong market, which has developed market status,
will be moved to China in the secondary emerging category.
