June 15, 2009 / 11:18 PM / 10 years ago

UPDATE 1-MSCI ups Israel to developed mkt; mulls Korea, Taiwan

(Adds details from MSCI statement, byline)

By Walter Brandimarte

NEW YORK, June 15 (Reuters) - Index compiler MSCI announced on Monday it will upgrade the status of Israel to developed from emerging market, and that it is studying to do the same for South Korea and Taiwan.

The United Arab Emirates and Qatar, currently considered frontier markets, will remain under review for a possible upgrade to emerging markets, MSCI said in a statement.

Israel’s upgrade will take place in May 2010, when the MSCI Israel Index will be included in the MSCI World Index .MIWD00000PUS and in the MSCI EAFE Index.

The reclassification of Israel, which was widely expected by analysts, will likely draw more investors into the country’s equity markets, since many are only allowed to invest in developed markets.

The other potential upgrades will be decided in June 2010, after a one-year review process.

South Korea, which many analysts expected to be raised to developed markets along with Israel, will need to make “significant process” before an upgrade, MSCI said.

The main problems facing the South Korean market is the lack of full convertibility of the won, the rigidity of the identification system, and anti-competitive practices, MSCI said.

Taiwan’s markets were placed under review for a possible upgrade after several positive market reform measures during the past months, including the implementation of a new settlement cycle, MSCI said, adding that the country already meets size and liquidity requirements of a developed market.

FRONTIERS UNCHANGED

MSCI disappointed analysts who expected an imminent upgrade of the United Arab Emirates, Kuwait and Qatar to emerging-market status.

Weighting on the markets of the United Arab Emirates and Qatar, according to MSCI, is the lack of formal segregation between custody and trading accounts and, to a lesser extent, foreign ownership limit levels imposed by Emirati and Qatari companies.

While both countries will remain under review for a possible upgrade next year, MSCI is no longer considering to raise Kuwait from frontier-market status due to its market accessibility issues.

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