Global investment index provider MSCI Inc. retained South Korea's emerging market status on its global equities index Wednesday, citing the country's high barrier in the financial sector.

"Many international institutional investors consider that the accessibility of the Korean equity market is not at Developed Market standards," MSCI said in a statement.

MSCI, the research arm of U.S. banking group Morgan Stanley, announced the decision on its Web site early Wednesday morning (Seoul time).

"The limited convertibility of the Korean won in the offshore currency market would be a significant issue for international institutional investors managing Developed Market portfolios as it would prevent them from using their usual currency trading practices," it said.

MSCI said global investors are given a limited leeway in making investments as they are forced to trade the Korean won during local business hours using South Korean counterparties.

"The rigidity of the ID system that makes in-kind transfers and off-exchange transactions prohibitive is of particular concern," the index provider added.

In-kind transfer refers to when an investor transfers one's specific investment in one financial institution to another without selling or buying. Off-exchange trading, or over-the-counter trading, is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties.

The retention came after MSCI deferred upgrading the South Korean market in June last year. Since 1989, MSCI has retained South Korea's emerging market status on its global equities index.

It has been considering the country's status upgrade since 2009.

MSCI, based in New York, tracks stock market performances of 78 economies classified into three market categories -- developed, emerging and frontier markets.

Stock market participants and financial institutions have been closely following the MSCI decision on expectations that an upgrade will expose the local bourse to a wider pool of global equity funds.

However, the Korea Exchange (KRX), South Korea's main bourse operator, said MSCI's latest decision is unlikely to have a meaningful impact on the local financial market.

The KRX added South Korea should also put its top priority in making policies that take the country's economy and financial market into account, rather than aiming just for a market stance upgrade.

Taiwan, which also sought a stance upgrade, maintained its emerging market status, while Qatar and the United Arab Emirates saw their status move up to emerging market from frontier stance.

"The MSCI Korea Index will not be reclassified to Developed Markets and will remain on the review list as long as the highlighted issues remain unaddressed," the index provider added.

MSCI will again review South Korea's market status in June, 2014. (Yonhap News)