Last September, the FTSE, London-based major global stock index compiler, upgraded Korea’s stock market from an “advanced emerging” to a “developed” one. Many reported that it would bring many benefits to Korea. Korea’s money market can secure liquidity provided by global investors from all over the world, especially from Europe. The global stock index is important because one country’s status in global index such as the FTSE index affects its stock market as well as its economy. Then, firstly let’s find out what the FTSE is.
1. What is the FTSE?
According to the FTSE’s official website (http://www.ftse.com), FTSE is an independent company jointly owned by the Financial Times and the London Stock Exchange. It aims to give objective market information by developing its own indices. The FTSE indices have been announced by the FTSE since 1999 and they are used by many global investors. The FTSE indices especially play a key role to benchmark the performance of the investment of the European funds estimated 2.5 trillion dollars. The FTSE indices classify 72 countries in the world into 4 categories: developed, advanced emerging market, secondary emerging, and frontier markets.
2. Classification of FTSE Global Equity Indices. (* FTSE Country Classification September 2009 Update)
|FTSE Global Equity Indices: 72 countries|
|Developed||Advanced Emerging||Secondary Emerging||Frontier|
|Australia, Austria, Belgium/Luxembourg, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, United Kingdom, United States||Brazil, Hungary, Mexico, Poland, South Africa, Taiwan||Argentina(to be moved to Frontier from September 2010), Chile, China, Columbia, Czech Republic, Egypt, India, Indonesia, Malaysia, Morocco, Pakistan, Peru, Philippines, Russia, Thailand, Turkey, UAE(from September 2010)||Bahrain, Bangladesh,Botswana, Bulgaria,Côte d’Ivoire, Croatia, Cyprus, Estonia, Jordan, Kenya, Lithuania, Macedonia, Malta (from September 2010), Mauritius, Nigeria Oman, Qatar, Romania,Serbia, Slovakia, Slovenia, Sri Lanka, Tunisia, Vietnam|
|25 countries||6 countries||17 countries||24 countries|
3. Evaluation Standard (* FTSE Country Classification September 2009 Update)
1> Market and Regulatory Environment
2>Custody and Settlement
3> Dealing Landscape
4> Derivative markets
4. Process of Assessment
5. What does it mean?
1> Korea becomes one of the advanced capital market in the world.
2> Attracting more global investors
Korean stock market will be less uncertain and volatile and can expect money from European fund, amounting to 2.5 billion dollars, and other global investors.
3> Improve Korean Stock Market structure
Status upgrade will bring about 2 major effects; 1)Reducing volatility in the domestic capital market 2) Attracting more capital from global investors.
4> Help Korea be listed in the MSCI index
Last June Korea failed to be listed in the MSCI world index. However, as Korea becomes one of the advanced market index, it will help Korea’s stock market to be listed in the MSCI world index.
5. What is the MSCI?
MSCI index is announced by Morgan Stanly Capital International which is the affiliated company of Morgan Stanly. What is the MSCI? As we saw, FTSE index influences greatly on European fund, whereas MSCI index affects American fund. Around $3.5 trillion are transacted by the MSCI index. MSCI announces several indices. Among them, ACWI, World Index EMF index are important parameters for the international investors. The ACWI(World Country World Index) which handles 49 countries of the world, World Index which contains 23 developed countries including U.S., U.K., and France, and EMF(Emerging Market Free) Index which includes 23 emerging country such as BRICs and Korea.