An electric board at the Korea Exchange’s Seoul office shows South Korea’s main bourse, the Kospi, at an all-time closing high of 3,220.70 points on April 20. (KRX)
South Korea’s main bourse Kospi could reach 4,035 points if the local market is bumped up into the MSCI World Index, which represents large and mid-cap equity performance across 24 developed nations, a local think tank said Tuesday.
The Korea Economic Research Institute predicted that the inclusion, one step up from its current listing as an emerging market, would help the stock market see an inflow of foreign investments, amounting to up to 61.1 trillion won ($54.5 billion).
The inclusion in the index for developed nations will also likely increase the market stability by 14.2 percent, the research organization said.
MSCI, the US finance firm, classifies the global equity market into three categories -- developed, developing and frontier markets. Global institutional investors and fund managers make decisions on investment size based on the MSCI indexes.
Korea is included in the MSCI index for emerging markets, but FTSE, a UK financial firm that also provides financial indexes, promoted it to a developed market status in 2009.
“Remaining in the MSCI emerging markets index will undermine the value of Corporate Korea, and make it difficult for private businesses to receive direct funding in a stable manner when the financial market faces sudden downturns,” said Choo Gwang-ho, a chief of economic strategy at the Korean research firm.
“If upgraded to the developed markets status, Korea will be able to address the so-called ‘discount’ issues and help boost the stock market while reducing volatility,” the KERI official said.
The inclusion in the developed markets index will help the nation attract foreign investments, between 17.8 trillion won and 61.1 trillion won, according to the Korean research firm.
It also projected that the Kospi index, which stood at 3,165 points on average in April, could increase by a range of 8 percent and 27.5 percent to a level between 3,418 and 4,035 points.
The Kospi hit a record-high closing of 3,220.70 points on April 20, but since slid down to 3,127.20 on May 3 mainly due to growing concerns over the resumption of short selling in the domestic market.
By Kim Young-won (firstname.lastname@example.org