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Korea's putative upgrade to a developed market by Morgan Stanley Capital International may prove a poison draft for the Korean stock market, analysts warn.
The Wall Street Journal Asia on Wednesday wrote, "MSCI Barra, the arbiter of international indexes, is considering reclassifying South Korea as a 'developed market'" from an "emerging market." Korea takes up more than 10 percent of the emerging-markets index.
"For Korea, reclassification could prove a source of some national pride. And it would realign investment funds as emerging-market investors dump Korean shares and developed-market funds buy them,¡± the daily wrote. ¡°But it could also mean a larger fish is suddenly a guppy in a bigger pond. Korea is one of the four largest countries in MSCI's Emerging Markets index. As such, it commands much attention from emerging-market investors. Then again, so did Greece before its 2001 migration to the developed markets, the most recent country to make that move.¡±
It quotes Arjun Divecha, a portfolio manager for the GMO Emerging Markets fund, as saying, "In theory, developed-market status would increase the demand as more investors see Korea as a part of their universe. But that didn't happen with Greece. It fell off the radar screen. Korea could become a small country no one gives a hoot about," reducing demand for and interest in Korean stocks. It said the difference is that Greece took up less than 5 percent of the emerging index.
If the reclassification happens, it will be before June, the daily added.
(englishnews@chosun.com )
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