It was a significant financial milestone for South Korea to confirm its official qualification for all prerequisites to join the World Government Bond Index, or WGBI, according to Choi Sang-mok, as it would open ways for increased investment inflows into the nation's bond market.
On September 30, during a press briefing, South Korea's Vice Minister of Finance, Choi Sang-mok, declared that the country had attained the benchmark criteria for inclusion in WGBI. Attainment of such a benchmark qualifies the country to attract foreign investors, hence it becomes an indication of economic stability and subsequent future growth.
"The inclusion in the WGBI would likely improve our bond market's attractiveness and liquidity," Choi said. The move is likely to give foreign investment a strong fillip, with funds tracking the index expected to buy South Korean bonds. Financial reforms and improvements in the country's market infrastructure are the reasons behind this feat, Choi said in an interview.
Major global investment firms and asset managers await South Korea's entry into this leading index. The WGBI enjoys the respect of a widely followed global benchmark of sovereign debt from a basket of advanced and emerging economies, which could lure large capital inflows after State bonds are reviewed worldwide.
Choi also added that this required the strictest standards of FTSE Russell, which compiles the WGBI, to determine the appropriateness of a market based on their criteria focusing on market accessibility, regulatory environment, and economic stability. Successful adherence to these benchmarks underlines South Korea's status as a stable and attractive investment destination.
Several experts speculate that this might have far-reaching implications for the economy of South Korea. Most importantly, it will raise the country's status and credibility in the global financial markets. This is likely to bring in more foreign direct investment with better market conditions.
The formal inclusion of South Korea in the WGBI is likely to be a process to occur in the near future. According to analysts' forecasts, South Korean bonds are expected to be included next year, opening a new path for the country's financial system.
Choi concluded the briefing with an assurance that more and more foreign investment would be attracted by the government to further develop the financial environment. As this milestone was achieved, the analysts are optimistic about the future direction of the South Korean bond market.
#SouthKorea #BondMarket #WGBI #FinancialMilestone #InvestmentEconomicGrowth
Author: Laura Mitchell
