Goldman Says South Korea Ever Closer to Joining Major Bond Index

(Bloomberg) -- South Korea will likely enter a key global bond index in September if it achieves a breakthrough in expanding foreign investors’ access to its government debt next month, according to Goldman Sachs Group Inc.

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Local media reports that Euroclear Bank SA and Clearstream will allow foreign investors to trade Korean sovereign securities from June suggest that the most important remaining key issue for the nation’s inclusion into the World Government Bond Index run by FTSE Russell should be resolved, Goldman analysts led by Danny Suwanapruti wrote in a note.

If FTSE includes Korea in its bond index at the next review in September, the move may lead to as much as $60 billion worth of inflows, Goldman analysts estimated.

Since FTSE put Korea on its watch list in September 2022, the Asian country has been intensifying efforts to woo foreign capital, most recently letting some global investors participate in the local interbank currency market. Authorities are also testing out extended trading hours of the domestic won market, ahead of its official extension due in July.

Such measures would be “nice-to-have but not necessarily a deal breaker since other markets such as China/Malaysia have limited liquid extended trading hours,” the Goldman analysts wrote.

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