FTSE to Include South Korean Bonds in its Global Bond Index by 2026: A Boost for the Korean Market

London, UK – October 26, 2023 – The FTSE Russell, a leading global index provider, announced today that it will include South Korean government bonds in its flagship FTSE World Government Bond Index (WGBI) by 2026. This significant inclusion is expected to attract billions of dollars in foreign investment into the Korean bond market, boosting its international profile and liquidity.

The decision follows a comprehensive review of the Korean bond market by FTSE Russell, which assessed factors such as market accessibility, liquidity, and transparency. The positive assessment highlights South Korea's robust economic fundamentals and the increasingly sophisticated nature of its debt market. The inclusion is scheduled to be phased in, starting in 2024 with a gradual increase in the weighting of Korean bonds until full inclusion in 2026.

This news is a major win for South Korea, signaling its growing importance in the global financial landscape. The inclusion in the WGBI will:

• Increase Foreign Investment: Passive investors tracking the WGBI, representing trillions of dollars in assets, will be compelled to allocate a portion of their portfolios to Korean government bonds.
• Enhance Market Liquidity: Increased demand from international investors will improve the liquidity of the Korean bond market, making it more attractive for both domestic and foreign players.
• Reduce Borrowing Costs: Greater demand often translates to lower borrowing costs for the South Korean government, freeing up resources for other crucial public spending initiatives.
• Boost South Korea's International Standing: This inclusion reinforces South Korea's status as a stable and reliable investment destination.

What This Means for Investors

For international investors, the inclusion of South Korean bonds presents a compelling opportunity to diversify their fixed-income portfolios. Korean government bonds offer a relatively safe haven within the Asian market, offering a potentially attractive yield while providing diversification benefits away from more traditional Western markets.

However, potential investors should carefully consider the inherent risks associated with any investment, including currency fluctuations and geopolitical uncertainties. It's crucial to conduct thorough due diligence before making any investment decisions.

Challenges and Future Prospects

While this announcement is largely positive, there are potential challenges. The South Korean government needs to ensure the continued development and transparency of its bond market to effectively manage the influx of foreign capital. This includes maintaining robust regulatory frameworks and ensuring easy access for international investors.

The inclusion of South Korean bonds in the WGBI marks a significant milestone for the country's financial markets. It's a testament to the country's economic strength and the continuous efforts to enhance its financial infrastructure. The long-term implications of this decision are expected to be significant, further solidifying South Korea's position as a key player in the global economy.

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Keywords: FTSE, FTSE Russell, South Korea, Korean bonds, government bonds, WGBI, FTSE World Government Bond Index, global bond index, foreign investment, emerging markets, fixed income, investment, finance, economic growth, market liquidity, diversification

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