(Bloomberg) -- The South Korean finance minister said many of the elements required for the government debt to be the included in a major global bond index are in place, a move that is expected to spark inflow of between 50 trillion won ($37.3 billion) to 60 trillion won into the country.
“We believe we have the right conditions and frameworks in place to be included in the World Government Bond Index,” finance minister Choi Sang-Mok said in a press conference on Monday. The government has been “communicating with investors,” but it is hard to predict the outcome since the decision is up to the investors, he added.
FTSE Russell is due to review the case for Korean inclusion in its global government bond benchmark on Oct. 8 and the government has completed a string of capital market reforms to make its debt more appealing to global investors.
Among the measures the government has implemented include extending the trading hours of the South Korean currency to 2 a.m local time since July. Last year, Korea Securities Depository signed an agreement with Euroclear Bank SA to improve foreign investors’ access to the nation’s government bond market, where the average daily trading volume exceeded 4 trillion won in August.
“Investors seem to recognize that South Korea is doing a good job on improving many conditions that requested by them,” Choi added. “But there are also voices that argue those improvements and tangible effects should be visible.”
But some global investment banks are skeptical.
Goldman Sachs Group Inc. expects Korea’s inclusion in 2025, arguing the country needs more progress on clearing transactions. Amundi SA sees Korean inclusion in March 2025 or later, but acknowledged improvements on the market structure.
Nomura Holdings Inc. strategists Albert Leung and Clair Gao highlighted foreign investors’ concern in a Sept. 6 note, which included the time-consuming process in securing tax exemption, the inconvenience in reporting the won transaction details and the challenges in the payment and settlement process through Euroclear accounts, which they said could result in FTSE Russell delaying the inclusion.
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