Global index provider MSCI retained South Korea in its emerging-market category, saying the country has long faced market access challenges, particularly in its onshore foreign exchange market, according to Reuters.

MSCI said Korean won may be non-deliverable offshore and liquidity is still insufficient during extended onshore foreign exchange trading hours to meet the execution standards expected in developed markets. The index provider acknowledged the corrections introduced by South Korean authorities but said investors would need more time to assess whether the changes provide sustained improvements.

South Korea’s finance ministry and financial regulator said the country’s exclusion from the developed-market watchlist this year reflected the fact that some reforms were still being implemented and their impact had yet to be fully assessed, Reuters reported. The authorities added that continued progress in foreign exchange and capital market reforms should eventually pave the way for inclusion in MSCI’s developed market index.

President Lee Jae-myung’s administration has launched a series of market reforms since taking office in June 2025, including plans to start round-the-clock foreign exchange trading from the second half of this year. Securing developed-market status is one of the government’s key policy objectives.

MSCI removed South Korea from its developed-market watchlist in 2014, citing restrictions on foreign exchange transactions and other market access concerns.

Despite the ratings setback, South Korea’s benchmark KOSPI index has emerged as the world’s best-performing equity benchmark over the past year, doubling in value on strong gains in semiconductor stocks driven by global investment in artificial intelligence infrastructure.

According to Reuters, MSCI’s decision was largely expected after the country’s poor performance in several accessibility measures in last week’s annual review, analysts said. The KOSPI rebounded more than 3% on Wednesday after plunging nearly 10% in the previous session, marking its biggest one-day decline since March.