SEOUL: South Korea will be included in a key global government bond index run by FTSE Russell, starting in November next year, the London-based organisation has said, a decision expected to help it attract significant foreign investment.
The country will be added to the FTSE Russell's World Government Bond Index (WGBI) effective with November 2025 index profiles and phased in over a one-year period on a quarterly basis as its market accessibility level will be reclassified from 1 to 2, reports Yonhap news agency.
The inclusion decision was made two years after the country was placed on its watch list. "Several initiatives intended to improve the accessibility of South Korean government bonds for international investors have been implemented by South Korean market authorities, which have facilitated the fulfillment of the criteria for a Market Accessibility Level of 2, " FTSE said.
With a market value of $29 trillion, the WGBI is a highly sought-after benchmark that would attract substantial capital inflows from global investors. South Korea is expected to attract as much as 90 trillion won ($67 billion) of foreign investment through the inclusion, officials and experts have said.
FTSE Russell notes a set of market reform measures by the South Korean government as positive developments, including the extension of trading hours of the local currency, allowing third-party foreign exchange and the establishment of a settlement system with Euroclear Bank and Clearstream to improve access by foreign investors to its government bond market.
"FTSE Russell congratulates the South Korean Ministry of Economy and Finance on its efforts to expand and encourage global investment in its local government bond market by implementing changes that have met the rigorous criteria for WGBI inclusion, as well as its ongoing commitment to addressing the practical feedback of international bond investors participating in its evolved market structure, " the report read.
South Korea welcomed the latest decision, noting that the announcement reflects global investors' confidence and trust in the country's economic policy direction.
"It is notable that South Korean bonds are now considered to be in line with those of advanced nations, " a senior presidential official told Yonhap News Agency over the phone.
"The government's efforts to bolster the country's credibility and maintain fiscal soundness appear to have played a significant role in the inclusion, " the official added.
Finance Minister Choi Sang-mok also said in a statement that the decision indicates that the global financial market has highly evaluated the South Korean economy's solid fundamentals and vibrancy, along with its fiscal soundness.
FTSE Russell is a subsidiary of the London Stock Exchange Group that produces, licenses and markets stock market indices.