S. Korea watchdog rules out drastic capital outflow after China's entry into MSCI

[Photo by Namgung Jin-ung = timeid@ajunews.com]

South Korea's state financial watchdog ruled out any drastic outflow of foreign capital despite a decision by US-based index provider Morgan Stanley Capital International (MSCI), the world's most influential compiler of share indexes, to include Chinese shares.

The Financial Services Commission (FSC) said may see a short-term outflow of foreign capital estimated at some 600 billion won (527 million US dollars) to 4.3 trillion won as China's entry into MSCI index would attract funds from global investors.

FSC vice chairman Jeong Eun-bo said the decision would have no significant impact on the domestic market because Chinese stocks would be included in the MSCI index from June 2018. "It has already been factored in our market," he said, citing the size of foreign capital inflow into South Korea and global funds flowing into emerging economies.

Financial experts predicted that 222 Chinese stocks would be included, or 0.73 percent of the widely tracked MSCI Emerging Markets Index, while the portion of South Korean stocks in the index would fall by 0.23 percent to 15.27 percent.

"I don't expect any radical outflow of foreign capital due to a drop in the portion of South Korean shares in the MSCI Emerging Markets Index," Chung said, predicting a global economic recovery, capital flowing from bonds to shares, and greater global funds in emerging economies.

Lim Chang-won = cwlim34@ajunews.com

Park Sae-jin swatchsjp@ajunews.com

S. Korea watchdog rules out drastic capital outflow after China's entry into MSCI

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