Korea added to watch list for inclusion in FTSE Russell's bond index

Finance Minister Choo Kyung-ho speaks during an emergency meeting with ministers in charge of economic affairs at the government complex building in Jung District, central Seoul, on Friday. [NEWS1]

Korea was added to a watch list for the potential inclusion in the World Government Bond Index (WGBI) operated by FTSE Russell, a move that could help the country better lure foreign investment, the Finance Ministry said Friday.

The WGBI is a broad index designed to measure the performance of government bond markets, including local currencies and sovereign bonds of major advanced nations.

Korea "will be added to the FTSE Fixed Income Country Classification Watch List for the potential reclassification of its market accessibility level from 1 to 2 and consideration for inclusion of the WGBI," the Finance Ministry said, citing the press release by the leading global index.

The agency will gather feedback from investors on the practicalities of investing and make a final determination around September next year, it added.

Korea has been pushing to join the index in a bid to attract more investment by foreigners. If included, some 60 trillion won ($41.87 billion) worth of global funds would flow into the domestic bond market, according to market watchers.

The latest decision came as Korea has devised various measures to improve the structure and accessibility of its capital market for investors, FTSE Russell said.

The measures include the proposed exemption of the withholding tax levied on investors in Korean Treasury Bonds. It is subject to approval by the National Assembly.

The Seoul government also vowed to allow foreign financial institutions to participate directly in the onshore foreign exchange market and to extend the trading hours.

"It will be a crucial chance for Korea to tackle the 'Korea discount' for the won-denominated sovereign bonds," Finance Minister Choo Kyung-ho said.

"The Korean government will reform measures to raise market accessibility by global investors and have active communications with market players."

Yonhap