By Kyung Bok Cho
Sept. 18 (Bloomberg) -- South Korea won ``developed'' status from FTSE Group, enabling its stock market to attract more of the estimated $3 trillion in funds that track the index provider's global benchmark indexes.
The country's equity market was previously classed as an ``advanced emerging'' market by the London-based index provider. The upgrade takes effect in September 2009, FTSE Chief Executive Mark Makepeace told reporters in Seoul today.
Some funds are restricted to investing in developed markets because of their perceived lower risk. Investors who benchmark against FTSE's South Korea indexes may buy shares including Samsung Electronics Co., the world's biggest computer-memory maker, and Posco, Asia's third-largest steelmaker, to reflect the upgrade.
``An upgrade would be positive for Korea as it's a vote of confidence in the market,'' said Suh Kyung Suk, who oversees the equivalent of $2.3 billion in index funds at Samsung Investment Trust Management Co. in Seoul, the nation's biggest index-fund manager. ``Leaving the emerging-market indexes will help reduce volatility, which could lead to an improvement in returns.''
South Korea has been on FTSE's ``watch list'' for a possible upgrade since 2004. The country has taken steps to raise its profile among foreign investors and increase the perception that its market was ready for developed status, such as easing restrictions on over-the-counter transactions.
The benchmark Kospi index, which rose to a record 2,064.85 on Oct. 31, is set for its first yearly loss since 2002 after inflation accelerated to the fastest pace in a decade, and swelling mortgage-related losses at financial institutions raised concern a global credit contraction will worsen.
To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net.
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