For now, you can keep counting South Korea and Taiwan as
emerging markets.
Financial index provider MSCI Inc. said Tuesday that it will
remove Korea and Taiwan from consideration for inclusion in its
developed-market index. The two countries are currently two of the
biggest components in MSCI's Emerging Markets Index.
MSCI has been reviewing Korea for a potential upgrade since
2008, the same year that rival index provider FTSE Inc. upgraded
Korea to developed-market status. Taiwan has been under review
since 2009.
MSCI said the decision to remove Korea and Taiwan from
consideration was driven by "the absence of any significant
improvements" in the accessibility of Korean and Taiwanese stock
markets in the past few years. The indexes will be added back to
the review list if there are any "meaningful improvements," MSCI
said.
MSCI hasn't upgraded an emerging-market country to
developed-market status since 2010, when it reclassified
Israel.
About $1.4 trillion in assets is benchmarked to the MSCI EM
Index, $243.1 billion of which is tracked by so-called "passive"
funds that mirror the components of the MSCI. An upgrade would have
forced these passive funds to sell their Korean or Taiwanese
shares.
The rest of the money is tracked by active managers who use MSCI
as a benchmark for their performance but are free to make bets that
stray from the index. These managers have more flexibility in how
they respond to changes in MSCI.
MSCI also announced Tuesday that it will continue to review
China A-shares, or mainland-listed stocks denominated in yuan, for
inclusion in the emerging markets index.
Write to Nicole Hong at nicole.hong@wsj.com
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