(Bloomberg) -- South Korea will join FTSE Russell’s benchmark bond index, capping months of official campaigning and a overhaul of financial market infrastructure in the hopes of attracting tens of billions of dollars of inflows.
The index provider also added India to its gauge of emerging market debt, according to a statement on Tuesday. Vietnamese stocks, meantime, were kept on a watch list for possible reclassification to emerging market.
“Index shifts are big and important to flows whenever and wherever they happen,” said Bob Savage, head of markets strategy and insight at BNY. “This is no exception. It’s been in the back burner for a while but timing wasn’t sure - so expect it to matter and to drive inflows to South Korea.”
Officials in Seoul actively campaigned for inclusion in the World Government Bond Index, a move they expect to attract as much as 90 trillion won ($67 billion) of foreign investment.
To fulfill requirements for the index, which has a market value of $29 trillion, Korea has extended trading hours for the won and made it easier for overseas investors to settle bond trades. Finance Minister Choi Sang-mok said late last month that his country had checked all the boxes to join.
Both Morgan Stanley and Goldman Sachs Group Inc. said Korea’s addition may be delayed by a year as there’s been slow take up of settlement via Euroclear Bank SA.
While the volume of overseas transactions via so-called omnibus accounts rose sharply in August, Korea Securities Depository said the number of offshore trades was still limited.
India, meanwhile, will join the FTSE Emerging Markets Government Bond Index. Unlike officials in Seoul, the government in New Delhi hasn’t been waging a public effort to join.
India joined JPMorgan Chase & Co.’s closely watched emerging market gauge to great fanfare in June despite the fact its bonds don’t get routed via Euroclear. FTSE Russell’s emerging-market bond index had a market value of $4.6 trillion as of late August.
With Russia excluded from indexes due to its invasion of Ukraine, global funds have sought new opportunities and pushed for the inclusion of the world’s fastest-growing major economy in debt benchmarks.
Bloomberg LP is the parent company of Bloomberg Index Services Ltd., which administers indexes that compete with those from other service providers.
--With assistance from Ronojoy Mazumdar, Jaehyun Eom, Whanwoong Choi, Greg Ritchie and Joanna Ossinger.
(Updates with Vietnam stocks in second paragraph, analyst quote in third.)
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