South Korea's stock market has once again been excluded from the watchlist for developed market status by MSCI Inc, remaining classified as an emerging market.

According to the results of the 2026 market classification review released by MSCI, the Korean market was not added to the watchlist for promotion to developed market status. This marks another setback in South Korea's long-running effort to achieve the upgrade.

MSCI Inc reportedly acknowledged the positive steps taken by South Korea's financial authorities to address long-standing market concerns. However, the index provider pointed to a key structural issue: the inability to physically settle the Korean won in offshore markets.

While the South Korean government is set to implement 24-hour foreign exchange trading starting in July, MSCI noted that liquidity remains insufficient. This limitation restricts the flexibility of index-tracking fund operators in conducting foreign exchange transactions, leading investors to conclude that the fundamental problem has not been resolved.

MSCI Inc annually classifies global equity markets into categories such as "developed markets," "emerging markets," "frontier markets," and "standalone markets." Currently, markets like the United States, Japan, and the United Kingdom are included in the developed market index, while South Korea, China, and India are classified as emerging markets.

South Korea has been included in the emerging market index since 1992. It first entered the watchlist for developed market status in 2008, 16 years later. However, MSCI has consistently declined to upgrade South Korea, citing issues related to currency convertibility and access to exchange data, and removed the country from the watchlist in 2014.