It is the 12th largest economy in the world with a higher GDP per capita than countries like New Zealand, Italy and Japan and yet South Korea remains in index provider MSCI’s emerging market basket.

This means the MSCI Emerging Markets index enjoys exposure to a market with many characteristics of a developed market – notably FTSE Russell diverges from MSCI in classifying South Korea as such.

The remaining sticking point, which saw MSCI keep South Korea in its current position in its latest annual review in June 2023 and fail to include it in its watchlist for effective promotion, is accessibility for outside investors.

South Korea has introduced some reforms in areas like improving access to its foreign exchange market and easing overseas ownership limits in stocks but has not yet gone far enough for MSCI’s liking.

Still, the South Korean market has delivered robust performance of late. MSCI Korea advancing 26.2% over the 12 months to 29 September 2023 – compared with 22.6% for the developed market MSCI World index and 12.2% for the MSCI Emerging Markets index.

The fortunes of South Korean shares are heavily tied to consumer electronics giant Samsung (005930:KRX), whose weighting in the MSCI Korea index is more than 30.5%.

Technology in general dominates, with a weighting of 46% which highlights the level of innovation in the South Korean economy.

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit www.temit.co.uk

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