Wed, Feb 11, 2004 - Page 11 News List

Taiwan on verge of upgrade

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FTSE Group, a global index compiler, may decide next month to upgrade South Korea and Taiwan to developed market status in its global equity indexes, according to a report by CLSA Asia-Pacific Markets.

Last week, Morgan Stanley Capital International Inc, FTSE's bigger rival, said it's studying the inclusion of countries such as South Korea and Taiwan to its developed market series of global benchmarks.

FTSE will announce the results of a study on market classification next month, "which would likely propel Taiwan and South Korea into the developed market series," CLSA's Chris Lobello and Dodo Cheng wrote in a note to clients dated yesterday.

A move to developed market status for South Korea and Taiwan would likely mean an increase in overseas funds as the markets will be seen as less risky.

FTSE has three classifications for countries: developed, advanced emerging and emerging.

Taiwan and South Korea, home to Asia's fifth- and sixth-largest stock markets by value, are in the advanced emerging class.

"Even small tweaks to how the US$2.5 trillion benchmarked against the FTSE worldwide is spread around mean big differences for Asia," Lobello and Cheng wrote.

Average trading activity in Greece, the last country to be upgraded from Advanced Emerging to Developed status, doubled following the nation's promotion, the CLSA report said.

The TAIEX gained 0.4 percent to 6488.34, and South Korea's Kospi index rose 0.2 percent to 866.80 at their market closes yesterday.

FTSE wrote in November in its consultation paper sent to clients that "the status of all advanced emerging markets has been reviewed and no changes are recommended at this time."

South Korea and Taiwan "would be put on the index compiler's so-called Watch List and with the possibility that the two markets may be promoted to developed status in 2005," the consultation paper said.

Companies such as South Korea's Samsung Electronics Co, the world's largest maker of memory chips, and Taiwan Semiconductor Manufacturing Co (台積電), the world's largest supplier of made-to-order semiconductors, are among stocks that may benefit, they said.

On Friday, Toshiaki Matsumae, head of MSCI's Tokyo office, said "MSCI has been studying South Korea as it's one of the key markets in the emerging markets" and that Taiwan is another country under consideration.

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