Korea fails to join FTSE Russell's global bond index

Finance

Published: 31 Mar. 2023, 10:19 Updated: 31 Mar. 2023, 11:09

Korea fails to join FTSE Russell's global bond index

Korean government bond prices are displayed at a screen at the Yonhap Infomax building in central Seoul on September. [YONHAP]

Korea has failed to be added to the World Government Bond Index (WGBI) run by FTSE Russell, missing market expectations of its early inclusion.

London-based FTSE Russell said Thursday that Korea will remain on the watch list for possible country reclassification and inclusion in the WGBI.

Seoul was added to the WGBI watch list in September 2022. Analysts had expected Korea to be included this March.

Now Seoul has to wait until September this year, when FTSE Russell announces its next decision on index inclusions.

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.

The index operator said it will keep tabs on Korea's implementation of reform measures and market responses before a decision.

A Seoul official said Friday that the government will do its level best to be included in September by speeding up the implementation of market-reform policies and better communicating with the market.

Korea and India are the only countries among the world's top 10 economies in terms of nominal gross domestic product that have yet to be included in the bond index.

Korea has been pushing for inclusion in the global bond index, which it hopes will help lure foreign investment and raise investor confidence in its government bonds.

To that end, Seoul has been easing market regulations, including announcing its plan to abolish the existing mandatory registration policy for foreigners investing in listed securities.

The country also began exempting non-residents from taxes on interest income and capital gains, as well as foreign companies' investment in Treasurys and monetary stabilization bonds.

In February, Seoul also announced it will extend the operating hours of its foreign exchange market — which currently runs for six and a half hours from 9 a.m. to 3:30 p.m. — to 17 hours to close at 2 a.m. the day after, as early as the second half of 2024.

Local brokerage house KB Securities has estimated that Korea would see an inflow of some $67 billion should the country be included in the WGBI.

Yonhap