FTSE to upgrade South Korea and Taiwan to developed markets after 2007

The FTSE said on Wednesday that South Korea and Taiwan will not be upgraded to developed market status until at least 2007.

This is not expected to have much impact on the two nations’ equities markets, it will delay the time when longer-term redistribution of some global fund flows could begin.

The upgrade from their current status as advanced emerging markets would allow funds with low-risk strategies that only invest in developed markets to buy Seoul and Taipei-listed stocks, which would bring new funds inflows into those markets.

On the other hand, an upgrade would remove two of the largest markets from the emerging markets group.

The FTSE said that before it could upgrade the two markets, they would have to further liberalize their foreign exchange markets and trading regulations for foreign investors.

It did acknowledge that both markets had made strides in that direction but that more progress must be made.

South Korea and Taiwan both said they would continue their reforms but that they believe that the foreign investors do not fully see and understand the steps toward reform that they have already taken.

Analysts do not expect either market to make an effort to address investor complaints about foreign exchange restrictions any time soon.

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