Seoul, Jan 9 (NationPress) On Friday, the government unveiled an extensive road map to facilitate South Korea's entry into the developed market index of the global index provider Morgan Stanley Capital International (MSCI). This initiative includes the transformation of the country's foreign exchange (FX) market to operate continuously for 24 hours.

This strategic plan is part of the government's ongoing efforts to tackle the so-called "Korea discount", which leads local stocks to trade at lower valuations compared to their actual fundamentals. The Ministry of Economy and Finance emphasized that this initiative aims to enhance South Korea's appeal as an investment hub, as reported by Yonhap news agency.

If the proposed measures are implemented successfully, South Korea could find itself on MSCI's watch list during the annual market classification review set for June, with the possibility of being included in the developed market index by June 2027.

Should everything unfold according to plan, investment from index-tracking funds may begin to flow into the domestic market in 2028, coinciding with the reclassification. This could yield significant benefits during President Lee Jae Myung's five-year term, concluding in June 2031.

Despite meeting the criteria for developed market status in terms of economic growth, market size, and liquidity, South Korea has remained classified as an emerging market due to perceived deficiencies in market accessibility.

MSCI has pointed out that the limited convertibility of the Korean won in offshore currency markets is a major barrier to its inclusion in the global index.

According to the road map, Seoul will initiate 24-hour FX market operations starting in July, as stated by the ministry.

Currently, South Korea's FX market is operational until 2 a.m., providing access for European investors but restricting trading opportunities for U.S.-based investors.

The upcoming July extension will be the second expansion of FX trading hours in just two years.

Kim Hi-jae, a ministry official, remarked, "If domestic brokerage firms run their intermediation systems around the clock, it will help eliminate trading gaps. It will also be advantageous for foreign investors regarding currency conversion and managing FX-related risks."

The ministry anticipates that the implementation of a 24-hour trading system and the facilitation of offshore settlements in the Korean won will help achieve adequate transaction volumes within the FX market.

Additionally, Seoul plans to relax regulations to permit won trading among offshore foreign investors by establishing a suitable settlement system, an action that has been limited until now, according to the ministry.

As outlined in MSCI's market classification released in June, 23 nations are categorized as developed markets, while 24, including South Korea, Taiwan, China, India, and Mexico, are listed as emerging markets.