MSCI keeps South Korea as emerging market, delays Indonesia review amid downgrade risk

Index provider MSCI kept South Korea classified as an "emerging market" in its most recent market accessibility review on Tuesday, while extending its review of Indonesia's status until November. The review disappointed hopes that Seoul could be included in MSCI's Developed Markets watchlist, a crucial step before a market can be upgraded to developed-market status. For Indonesia, the extended review comes after MSCI raised concerns about market accessibility earlier this year and froze the country's stocks from its indexes in January, citing investability concerns. MSCI said that it would continue evaluating reforms introduced by Indonesian authorities, but should these measures prove insufficient, the index provider would "consider a range of options for the appropriate treatment for the Indonesia market," including a potential downgrade to frontier-market status. In South Korea's case, MSCI said the limited convertibility of the Korean won in the offshore currency markets remained a key barrier to reclassification. While the index provider acknowledged measures announced by South Korean authorities to address those concerns, it said "investors have communicated that the underlying issues have not been fully resolved." Seoul has long sought inclusion in MSCI's Developed Markets category. Analysts previously told CNBC that an upgrade could help resolve the so-called "Korea discount," a term used to describe the lower valuations often assigned to South Korean stocks compared with global peers. This is breaking news, please check back for updates.