MSCI Inc, the world’s leading provider of investment decision support tools, said yesterday it will keep Taiwan’s emerging-market status unchanged as accessibility issues related to currency trading and equity market settlement prevent an upgrade.
The announcement came after the Geneva-based company concluded its annual market classification review.
“The MSCI Taiwan Index meets many developed markets criteria, including economic development, market size and liquidity,” the Swiss financial service provider said in a report released overnight.
However, market accessibility issues over currency trading and equity market settlements continue to hinder the classification as developed markets, the report said.
Likewise, MSCI left the South Korean bourse’s status intact.
Despite positive developments on the provision of stock market data, the South Korean authorities have made little progress on other significant accessibility issues highlighted in previous annual market classification reviews, the review results showed.
In particular, MSCI voiced concerns over limitations in currency trading and equity settlement across multiple accounts, the report said, adding that the limitations prevent a reclassification of the MSCI Korea Index to a developed market.
Both Taiwan and South Korea will remain under review for potential reclassification as developed markets next year, the report said.
Meanwhile, MSCI said it welcomed the recent easing in the Chinese domestic equity market, especially the increase in investment quotas made available to international investors.
However, there are still major constraints in areas related to the mobility of capital, qualified foreign institutional investors (QFII), and the country quota ceilings, according to the report.
The restrictions prevent potential inclusion of the MSCI China’s A Index in its emerging markets index, it said.
Many small to mid-size institutions worldwide would not qualify for a QFII quota at the thresholds currently set by the Chinese authorities and would not be able to replicate the index, the report said.