Latest news with #WorldGovernmentBondIndex
Korea Herald
09-04-2025
- Business
- Korea Herald
Korean bonds on track for WGBI inclusion in 2026
Authorities say 5-month delay aims to give global investors more time to prepare for Korean bond exposure Korea's inclusion in the World Government Bond Index, a key global benchmark for sovereign fixed-income performance, has been confirmed, though the entry date has been postponed by five months, according to the Finance Ministry on Wednesday. The timeline for the full integration into the WGBI, managed by Financial Times Stock Exchange Russell, remains unchanged, with completion still set for November 2026. However, the initial inclusion has been shifted from November 2025 to April 2026. The inclusion will phase in on a monthly basis, not a quarterly basis. 'Inclusion will be phased-in over a shorter eight-month period, in eight equal monthly tranches, commencing with April 2026 index profiles and completed with November 2026 index profiles,' The London-based global index compiler said in its index review update released on Tuesday. FTSE Russell announced its plan to add Korean sovereign bonds to the index in October 2023, following their placement on the watch list in September 2022. The refinement of the inclusion strategy is driven by various factors, according to FTSE Russell, including feedback indicating that "monthly tranches would facilitate easier and more straightforward portfolio management for asset managers." 'Index users have indicated that they are able to add the full exposure of South Korea over a condensed time period if sequential monthly tranches are used,' it said. This adjustment also aims to ensure that the full weight of Korea is integrated into the FTSE WGBI by November 2026, it added. Korea is expected to become the 26th country included in the WGBI, with its weighting in the index standing at 2.05 percent, making it the ninth largest among other government bonds. With the revised timeline, anticipated benefits of inclusion — such as increased fund inflows from advanced economies, reduced funding costs and alleviated pressure on the Korean won against the US dollar — are expected to face delays. The government previously estimated that WGBI inclusion would attract an additional $56 billion in offshore investor funds. Financial authorities have emphasized that the change in the timeframe is intended to give investors ample preparation time and maximize the positive impact of the integration. "The timing adjustment is primarily technical. Many investors highlighted the need for adequate preparation time to conduct tests, given that this represents their first venture into the Korean market,' said Kim Jae-hwan, director-general of International Finance at the Ministry of Economy and Finance. Kim also noted that changes to inclusion timelines are not unique to Korea, referencing a similar situation encountered with China in the past due to its operational environment. Addressing speculations regarding political uncertainties stemming from former President Yoon Suk Yeol's Dec. 3 imposition of martial law causing the delay, he ruled out this possibility. 'I think there's zero percent possibility,' he stated, adding that Japanese investors have expressed the need for more time for their complex procedures and testing before allocating capital into Korean bonds through the index.
Korea Herald
09-04-2025
- Business
- Korea Herald
Korean bonds on track for WGBI inclusion in 2026
Authorities say 5-month delay aims to give global investors more time to prepare for Korean bond exposure Korea's inclusion in the World Government Bond Index, a key global benchmark for sovereign fixed-income performance, has been confirmed, though the entry date has been postponed by five months, according to the Finance Ministry on Wednesday. The timeline for the full integration into the WGBI, managed by Financial Times Stock Exchange Russell, remains unchanged, with completion still set for November 2026. However, the initial inclusion has been shifted from November 2025 to April 2026. The inclusion will phase in on a monthly basis, not a quarterly basis. 'Inclusion will be phased-in over a shorter eight-month period, in eight equal monthly tranches, commencing with April 2026 index profiles and completed with November 2026 index profiles,' The London-based global index compiler said in its index review update released on Tuesday. FTSE Russell announced its plan to add Korean sovereign bonds to the index in October 2023, following their placement on the watch list in September 2022. The refinement of the inclusion strategy is driven by various factors, according to FTSE Russell, including feedback indicating that "monthly tranches would facilitate easier and more straightforward portfolio management for asset managers." 'Index users have indicated that they are able to add the full exposure of South Korea over a condensed time period if sequential monthly tranches are used,' it said. This adjustment also aims to ensure that the full weight of Korea is integrated into the FTSE WGBI by November 2026, it added. Korea is expected to become the 26th country included in the WGBI, with its weighting in the index standing at 2.05 percent, making it the ninth largest among other government bonds. With the revised timeline, anticipated benefits of inclusion — such as increased fund inflows from advanced economies, reduced funding costs and alleviated pressure on the Korean won against the US dollar — are expected to face delays. The government previously estimated that WGBI inclusion would attract an additional $56 billion in offshore investor funds. Financial authorities have emphasized that the change in the timeframe is intended to give investors ample preparation time and maximize the positive impact of the integration. "The timing adjustment is primarily technical. Many investors highlighted the need for adequate preparation time to conduct tests, given that this represents their first venture into the Korean market,' said Kim Jae-hwan, director-general of International Finance at the Ministry of Economy and Finance. Kim also noted that changes to inclusion timelines are not unique to Korea, referencing a similar situation encountered with China in the past due to its operational environment. Addressing speculations regarding political uncertainties stemming from former President Yoon Suk Yeol's Dec. 3 imposition of martial law causing the delay, he ruled out this possibility. 'I think there's zero percent possibility,' he stated, adding that Japanese investors have expressed the need for more time for their complex procedures and testing before allocating capital into Korean bonds through the index.
Korea Herald
26-03-2025
- Business
- Korea Herald
Korea targets greater foreign appetite for sovereign bonds
Finance Ministry amplifies bond promotion ahead of November's WGBI inclusion The South Korean government has initiated its first series of online investor relations sessions to attract new foreign investment in its sovereign bonds, while also defending its external credibility amid prevailing uncertainties in domestic and international markets. Second Vice Finance Minister Kim Yoon-sang presided over the virtual meeting, which was held Tuesday and attended by some 130 representatives from asset management firms, pension funds, insurance companies and investment banks based in major financial hubs — including London, Hong Kong, Singapore and Japan — according to the ministry on Wednesday. 'The economic system is functioning normally, minimizing volatility in the financial and foreign exchange markets, even amid internal and external uncertainties,' Kim said. During the session, the ministry outlined the investment conditions for government bonds as well as the current status of policies aimed at enhancing the structure of the bond and foreign exchange markets. Fitch, the global credit rating agency, reaffirmed Korea's long-term sovereign credit rating at "AA-" in February, the company's fourth-highest level. This decision reflects the international community's strong confidence in the Korean economy, according to Kim. Another factor demonstrating the economy's resilience is Korea's credit default swap spread — a key indicator of perceived default risk — which has narrowed following fluctuations observed in early December when President Yoon Suk Yeol instituted martial law. Generally, as a country's credit risk increases, the CDS premium rises; conversely, when the risk decreases, the premium falls. The 5-year CDS spreads exceeded 40 basis points in mid-January when a Seoul court issued an arrest warrant for Yoon over the martial law declaration, but stabilized to an average of 31 basis points last month. The vice minister also expressed optimism that the inclusion of the country's sovereign bonds in FTSE Russell's benchmark bond index will help strengthen the market. 'With sound fiscal and external soundness, and inclusion in the World Government Bond Index this year, investment attractiveness will further increase,' he said. The WGBI inclusion, set to take effect in November 2025, is expected to attract additional inflows of up to 80 trillion won ($54.6 billion) in offshore investor funds. Ahead of this official inclusion, financial authorities emphasized their commitment to addressing investment challenges for investors, including tax exemptions and streamlining investment procedures. Earlier this month, the government unveiled its plan to simplify the application process for tax exemptions on investments in sovereign bonds by foreign investors. Investors will only need to submit basic information to verify their non-resident status, such as name, address, nationality and identification number, to the international depository or domestic financial institutions, including foreign bank branches. Last month, foreign investment in domestic bonds recorded a net influx of over 5 trillion won, driven by an increase in short-term arbitrage trading and demand for medium- to long-term bonds. According to a report released by the Bank of Korea on March 12, the combined net inflow of foreign investment in domestic bonds and stocks in February reached $1.73 billion. Despite a continuous net outflow in stock investments, the substantial inflow of bond funds has marked a shift to a net inflow for the first time in six months.
Korea Herald
16-03-2025
- Business
- Korea Herald
Korea's finance ambassador meets with global investors in New York
Finance Ambassador Choi Jong-ku promotes Korean market, reassures global investors of economic stability at New York IR session South Korea emphasized its market stability and commitment to enhancing accessibility for global investors in New York, aiming to reassure them amid ongoing domestic political turmoil. The Ministry of Economy and Finance announced Sunday that Choi Jong-ku, Korea's ambassador for international financial cooperation, held a briefing on Tuesday for global investors. Senior executives from some of the world's largest asset managers, including BlackRock, Pacific Investment Management Company, Goldman Sachs and Blackstone, attended the session. "State affairs have remained stable over the past two and a half months under acting President Choi Sang-mok's leadership," the ambassador told investors, adding, "Korea's financial and foreign exchange markets are swiftly rebounding, with a robust economic system effectively managing political risks." The New York session followed Choi's earlier meetings with Asian investors in Singapore and Hong Kong in February as part of the government's efforts to address concerns about the country's economic stability following President Yoon Suk Yeol's martial law enactment in December and the ongoing impeachment trial. During the briefing, the ambassador highlighted key indicators of Korea's economic strength. "Korea maintains strong external credibility," he said, noting that major rating agencies have upheld its sovereign rating, with Fitch reaffirming "AA-" last month. He also stressed Korea's solid fundamentals, including the world's ninth-largest foreign exchange reserves, sixth-largest export volume and a $100 billion trade surplus. Korea's external payment capacity is strengthening, he added, with net external financial assets recently reaching a record $1.1 trillion. Asked about Korea's response to higher US tariffs, Choi said, "We will address any misunderstandings through various channels and engage in discussions on sectors of key US interests, such as shipbuilding and energy, to ensure mutual benefit." He noted that, under the Korea-US free trade agreement, the applied tariff rate on Korean imports from the US stood at 0.79 percent in 2024. Choi reaffirmed the government's commitment to enhancing market value and accessibility. "As with the World Government Bond Index inclusion, we expect Korea to naturally gain entry into Morgan Stanley Capital International's developed market index over time." Last summer, FTSE Russell maintained Korea's MSCI emerging market status. The ambassador also held separate meetings with top financial institutions in New York. Speaking with FTSE CEO Fiona Bassett, he discussed Korea's preparations ahead of WGBI inclusion in November, while also briefing MSCI executives on the government's capital market reforms. The ministry highlighted Choi's meeting with Evan Russo, CEO of New York-based Lazard Asset Management, who expressed the firm's commitment to expanding investments in Korea, noting that many capital market issues have been resolved. Russo also underscored Korea's key position in the global supply chain, stressing that the country should leverage this advantage in negotiations with the US to secure a stronger position over other nations. The ministry added Choi would maintain engagement with global investors and visit additional countries, including Japan, ahead of the final WGBI review in April.
