The South Korean government is planning to come up with a foreign exchange market improvement plan early next month. It is related to the watchlist of the MSCI World Index, which is updated every June.
Unlike the previous Moon Jae-in government, the Yoon Suk-yeol government is cautious about the improvement plan being interpreted as South Korea’s will to be included in the MSCI World Index. The current government’s stance is to continue to improve the market by communication with domestic institutions as the inclusion may lead to more risks such as market volatility.
The plan is expected to include market hour extension to 01:00 and detailed rules and regulations regarding foreign institutions’ direct participation in the market. According to experts, the possibility of the inclusion can rise based on the improvement plan to be announced before the update and then more investment will flow in to eliminate the chronic undervaluation of the South Korean stock market. According to the Korea Economic Research Institute, the maximum inflow is estimated at 61 trillion won.
It is also pointed out that the inclusion will lead to more foreign exchange market opening and an even higher level of forex market volatility. “The South Korean economy is highly dependent on trade and its foreign capital regulations are relatively lighter,” said an expert, adding, “This means the inclusion will lead to more frequent foreign capital inflow and outflow and a higher level of forex volatility.”
This is why the government is cautious as mentioned above. According to it, forex market opening is necessary indeed and yet won internationalization needs to be implemented in stages with financial markets still unstable. The improvement plan is unlikely to mention the World Index inclusion and the current government’s pace related to the matter is likely to be different from that of the previous government.
Read More:Foreign Exchange Market Improvement Plan to be Announced Soon
2022-05-30 03:05:35
