No upgrade for Korea from MSCIKorea, Taiwan, the United Arab Emirates and Qatar failed to secure an upgrade at MSCI, whose stock indexes are tracked by investors with about $7 trillion in assets.
The New York-based index provider will keep Korea and Taiwan’s emerging-market status, and Qatar and the UAE’s frontier classification, it said in a statement on Wednesday. The two Asian countries will be kept under review for potential elevation to developed markets, while the Persian Gulf nations will remain under review for possible reclassification to emerging markets, it said.
MSCI tracks economic development, trading volumes and market accessibility to assess market classifications. Upgrades could lead to the nations’ equities luring more of the investor assets that follow MSCI’s gauges. Winning developed status could draw a net $8.3 billion to Korea and $5.2 billion to Taiwan, HSBC Holdings analysts led by Tom Zhou wrote in a report Monday.
“Expectations were quite low, and we didn’t see much positions built targeted for any potential change,” said Chung Yun-sik, the Seoul-based chief investment officer for equities at ING Investment Management Korea, which oversees about $16 billion.
“Developments of Europe’s ongoing debt crisis will have a bigger sway.”
Korea, the UAE and Qatar were evaluated for a fourth time for an upgrade, while Taiwan was reviewed for a third year. Korea’s $1 trillion stock market is the largest of the four, according to data compiled by Bloomberg. Equities in Taiwan are valued at $740 billion, compared with Qatar’s $122 billion and the UAE’s $99 billion.
Greece will be reviewed for possible reclassification to emerging market and Morocco to frontier, MSCI said.
MSCI cited the absence of offshore currency markets for bypassing Korea and Taiwan for upgrades. For Korea, MSCI also cited limitations in equity settlement across multiple accounts. The nation is already classified as a developed market by FTSE Group, a rival index compiler.
Korea represents about 15 percent of the $6.8 trillion MSCI Emerging Markets Index, according to HSBC’s report. Taiwan accounted for 11 percent, the report showed. Korea’s benchmark Kospi Index dropped 0.2 percent, while Taiwan’s Taiex Index sank 0.3 percent as of 10:30 a.m.,Seoul time. MSCI’s gauge of developing nations lost 0.2 percent.
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