FTSE maintains Seoul's status quo
Speculation that South Korea would be upgraded to developed market status in FTSE's global equity indices fell flat yesterday as the global index provider said both Korea and Taiwan would continue to be classified as emerging markets for at least another 18 months.
As expected, China A shares also failed to be included in the index series as an emerging market for the first time.
FTSE Group said no country currently meets the criteria to be reclassified or to join the index series for the first time but added that 'substantial progress had been made to improve the investment environment in a large number of countries'.
Ben Rudd, Asia investment strategist with ABN Amro in London, said Taiwan was not expected to make the upgrade this time around but there may be some disappointment with regard to Korea, as speculation of a reclassification had supported the market in the past few days.
According to Merrill Lynch's latest fund manager survey, which was released yesterday, South Korea has surpassed Hong Kong as the most overweight market in Asia Pacific outside Japan.
FTSE said Korea needs to improve the conditions for off-exchange transactions and make more progress on ensuring a 'free and well-developed foreign exchange market' before it can be upgraded to developed market status.
The index provider made no comments on what improvements are needed for China A shares to join the index but Mr Rudd said the market currently met seven of the eight necessary criteria. The key remaining issue is the restrictions imposed on repatriation of money.
