South Korea's short-selling accessibility has improved, MSCI says

• MSCI classification review due next week
• South Korea unlikely to get an upgrade this time - analyst
• MSCI says restrictions for foreign investors in Argentina still in place
• Greece improvements cited by MSCI, setting stage for an upgrade

SINGAPORE, June 19 (Reuters) - South Korea's stock market accessibility for short-selling has improved and has no major issues, MSCI said on Friday as investors brace for next week's market classification from the global index provider and hope the country gets an upgrade.

The stock market of Asia's fourth-largest economy is currently categorised as an emerging market by MSCI, despite many other metrics indicating its developed-economy status.

South Korea has been chasing after developed market status for some years and investors hope next week's classification will include South Korea being added to the watch list for an upgrade.

The country lifted a full market-wide ban on short selling of stocks in March for the first time in five years, which had been cited by foreign investors and MSCI as a major factor hindering market access.

In its annual market accessibility review released on Friday, MSCI said there has been an improvement in South Korea's short-selling market accessibility, nudging up the rating to "+" or no major issues, improvements possible, from "-" or improvements needed.

The benchmark index KOSPI .KSII has had a stellar year, surging 24% so far, making it the best performing Asian stock market in 2025 as political clarity and optimism around corporate reforms buoy investor sentiment.

An upgrade in the coming years would lead to significant inflows, analysts say, although there is skepticism the move will happen next week.

Lee Jae-man, a researcher at Hana Securities, said the South Korean capital market is still receiving poor grades in many subcategories compared to major developed markets.

"Based on these results, the possibility of being listed as a country under observation for reclassification to MSCI developed countries this year is expected to be less than 50%."

MSCI noted the series of foreign exchange market reforms implemented in South Korea but said the country does not have an offshore currency market and constraints persist on the onshore currency market.

GREECE IMPROVEMENTS

In a wide-ranging review, MSCI said reforms adopted and validated by market participants in Greece have led to rating improvement in clearing and settlement, stock lending and short selling criteria during its review cycle.

Other index providers S&P Dow Jones and FTSE Russell have put the country on a watchlist for a potential upgrade to developed market status.

Greece has made a steady recovery from a debt crisis that started in 2009 and almost saw it crash out of the euro before an international bailout. However, as a sign of its comeback, the country has also been repaying its bailout loans and debt ahead of schedule.

Moody's became the last among major credit rating agencies in March to lift the country's debt rating to "investment grade".

MSCI meanwhile noted that while Argentina eased some of the restrictions on capital flows earlier this year, several restrictions for foreign institutional investors are still in place.

MSCI classifies Argentina as a Standalone Market rather than as part of its widely followed suite of emerging market indexes, with speculation rising that the country could be in line to be added back soon.

The index provider also said Bulgaria was not included in the accessibility review report released on Friday, with information for Bulgaria due to be made available on June 24, 2025, when MSCI will announce its annual market classification.

Bulgaria is under review for potential reclassification from Standalone Market status to Frontier Market status.