Korea Fails Early Inclusion in 3 Major Bond Index WGBI... Remains Watchlist Country

South Korea failed to gain early inclusion in the World Government Bond Index (WGBI), one of the world's top three bond indices.

FTSE Russell, the UK Financial Times Stock Exchange managing the WGBI, announced on the 28th (local time) the September FTSE bond market country classification, maintaining South Korea's status as a watchlist country. This means the inclusion in the WGBI has been postponed.

FTSE Russell stated, "Korean market authorities have announced several initiatives to improve market structure and capital market accessibility," adding, "We will continue to monitor the progress and effectiveness of institutional improvements with market participants." While the authorities' efforts to improve regulations are positively evaluated, it is interpreted that more time is needed to observe future implementation.

The WGBI is one of the world's top three bond indices, with assets under management reaching $2.5 trillion. FTSE Russell regularly decides on WGBI inclusion twice a year, in March and September, based on factors such as government bond issuance size, country credit rating, and market accessibility.

South Korea was placed on FTSE Russell's watchlist in September last year but failed to gain early inclusion in the index again this March and this time as well. Considering that final inclusion typically takes about two years, it is expected to be included around September next year.

If South Korea's government bonds are included in the WGBI, foreign funds tracking the index will flow into the government bond market, enhancing the credibility of the bonds. This is expected to lower bond issuance yields and attract additional foreign currency funds.

The market expects that about 90 trillion won will flow into the domestic bond market due to WGBI inclusion.

This content was produced with the assistance of AI translation services.