Presidential Office: "Successful Inclusion in WGBI, Driving Foreign Exchange Market Stability and KOSPI Rise"

Success on the Fourth Attempt... Yongsan Also Rejoices

[Image source=Yonhap News]

The Presidential Office emphasized on the 9th that South Korea's successful inclusion in the World Government Bond Index (WGBI), one of the world's top three bond indices, "means that Korean government bonds are effectively recognized at an advanced country level," adding that "it will lower financing costs for our companies and stabilize the foreign exchange market."

FTSE Russell, the British Financial Times Stock Exchange, announced on the 8th (local time) its plan to include South Korea in the WGBI as part of its 'October 2024 Bond Market Country Classification.'

A senior official from the Presidential Office said in a phone interview with Asia Economy on the same day, "With the decision to include Korea in the WGBI, overseas funds will flow into the domestic market, contributing to reduced financing costs for the government and companies due to interest rate stability, and securing stable fiscal management." The official also evaluated, "The government's continuous efforts to improve national credit ratings, especially maintaining sound fiscal operations, played a significant role in the index inclusion."

President Yoon Suk-yeol, who is on a state visit to Singapore, was briefed on the related matters locally. It was reported that he welcomed the news of South Korea's successful inclusion in the WGBI on the fourth attempt since becoming a watchlist country in September 2022.

Regarding the short-selling ban issue pointed out by FTSE Russell, the Presidential Office official stated, "We are preparing legal, technical, and institutional measures to block illegal short selling," adding, "If illegal short selling is completely blocked, lifting the short-selling ban around March next year should not pose significant problems."

The WGBI, an index operated by FTSE Russell, is considered one of the world's top three bond indices alongside the Bloomberg-Barclays Global Aggregate Index and the JP Morgan Emerging Market Bond Index. Considering that funds tracking the WGBI amount to $2 trillion to $2.5 trillion, it is expected that at least $50 billion (approximately 70 trillion KRW) will gradually flow into the Korean government bond market starting from November next year when the index is actually reflected.

A Presidential Office official explained, "It is particularly meaningful that countries whose currencies are not reserve currencies, such as China, Australia, and Canada, have had their bonds recognized," adding, "As demand for Korean won increases for investing in Korean government bonds, the supply and demand in the foreign exchange market will improve, potentially lowering the won-dollar exchange rate." The official further expressed expectations, saying, "Due to falling bond yields and won appreciation, this could become a driving force for the KOSPI index rise, bringing positive effects to the domestic financial investment market."

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