The world’s top-performing stock market still isn’t a developed market. Here’s why, according to the MSCI chief

There is one key issue standing in the way of South Korea obtaining developed-market status, MSCI’s CEO said Thursday, after the equity index provider maintained the country’s emerging market classification.

“South Korea is one of the most developed markets on the planet,” Henry Fernandez, CEO of MSCI, told CNBC’s “Squawk Box Europe.”

“Economically, technologically, society-wise, et cetera. [But] our big focus is on the functioning of the equity markets, and in that respect, they exhibit a large number of attributes of emerging markets.”

South Korea’s Kospi index — home to shares of some of the world’s leading tech companies, including Samsung and SK Hynix — was the best-performing equity index in the world in 2025, and has surged 112% so far this year.

But a key issue holding the country back from a classification upgrade, according to Fernandez — trading restriction imposed on the Korean won.

“When you want to buy and sell equities in the U.K., in France, in Germany, in Japan, in the U.S. — any kind of developed market — you’ve got to buy the currency first to buy the equity, and when you sell the equity, you’ve got to sell the currency, and you want to do it at your convenience in London, in New York, in Frankfurt, in Tokyo, or somewhere else,” he said, before explaining that “you cannot do that in Korea.”

“The only place you can buy the Korean won is in office hours, day trading hours in Seoul,” he said, adding that this makes rebalancing portfolios difficult for index fund managers invested in South Korean equities.

A third of the global money being managed on indexes, Fernandez added, is attributable to index funds.

While Fernandez noted that reforms to the Korean system are “clearly underway” and “enormous progress” was being made, he said that the problem extends beyond trading hours to questions about liquidity in the currency market.

“The doubt that we have, [on] which we need to be convinced, is that every other developed market in the world let the currency trade anywhere,” he told CNBC. “If Korea wants to depend on a night shift of trading the won, so that we in London, we in New York can trade it, the question becomes, will that be a large pool of liquidity with a tight bid-ask spread? I have my doubts.”

Earlier this week, MSCI published a review of its classification system, which South Korea held in the emerging markets category. It disappointed hopes that the country would be put into MSCI’s Developed Markets watchlist, a necessary step for any market eyeing an upgrade to developed-market status.

MSCI also cited rigid investor identification systems, restrictions on in-kind transfers and off-exchange transactions, and limits on investment products due to restrictions governing the use of exchange data as reasons not to upgrade South Korea.

“Investors have communicated that the underlying issues have not been fully resolved,” the index provider said.

South Korea is preparing to launch 24-hour ‌trading in the dollar-won spot ​market on ​July 6.

But MSCI’s Fernandez told CNBC on Thursday that “if they make it work — they make many miracles work in Korea — then the question is, at two in the morning, would you want to be selling enough in a very liquid and deep market?”

“It’s hard,” he added.

Seoul has long sought an upgrade into MSCI’s Developed Markets category. It is also classified as a developed market in under the FTSE Equity Country Classification scheme, a categorization overseen by rival index provider FTSE Russell.

Earlier this year, the Kospi overtook London’s FTSE 100 to become the eighth most valuable national equity index in the world.