Korea fails to be included in the World Government Bond Index… Maintain observation target country

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Maintain market accessibility level 2

Korea’s inclusion in the World Government Bond Index (WGBI) failed again.

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On the 28th (local time), the Financial Times Stock Exchange (FTSE) Russell, an affiliate of the London Stock Exchange, issued a press release on its website and announced that it would maintain Korea as an observation country with the possibility of an upward adjustment in market accessibility (Level 1 → Level 2).

Incorporation into the World Government Bond Index has failed.

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FTSE Russell said this decision “follows the announcement of several initiatives proposed by the Korean market authorities to improve market structure and access to capital markets.”

FTSE Russell added that it will continue to accept the opinions of market participants for a practical evaluation of Korea’s proposed reform plan.

WGBI is considered one of the world’s top three bond indices, and includes government bonds from 23 major countries, including the US, UK, Japan, and China. The total follow-on funds are estimated to be around $2.5 trillion.

If Korea joins the WGBI, it is expected that the stability of the government bond market will increase through increased foreign investment inflow and stabilization of supply and demand. Regarding the scale of foreign inflow upon inclusion in the index, NH Investment & Securities estimated it to be around KRW 50 to 60 trillion, and Meritz Securities estimated it to be around KRW 70 to 84 trillion.

The FTSE Bond Market Country Classification is published regularly in March and September each year. Korea was listed on the WGBI observation list for the first time in September last year. As the transfer failed in March of this year, expectations were high that the transfer would be successful in September, but it failed again.

FTSE Russell classifies market accessibility by country into levels 0 to 2 in its bond market country classification. WGBI inclusion is only possible for Level 2 countries.

In order to be incorporated into the WGBI, three requirements must be met: ▲ government bond issuance balance ▲ credit rating ▲ market accessibility.

On this day, FTSE Russell maintained India as an observation country that could potentially be upgraded to level 1. Switzerland was maintained as an observation country that could be upgraded to market accessibility level 2.

Source: Donga

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