South Korea Finance Minister Seeking to Get Domestic Bonds into WGBI This Year

South Korean Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho speaks during an interview with Reuters in Incheon, South Korea, May 3, 2023.

INCHEON, South Korea, May 3 (Reuters) – South Korea is seeking to have its domestic bonds added to a key international market index this year although a decision by the benchmark publisher may not be made until September next year, the country’s finance minister told Reuters on Wednesday.

The government has said it hoped its bonds would be added to FTSE Russell’s World Government Bond Index (WGBI) as early as this year, a move that could bring fresh foreign funds into domestic capital markets.

“Under the usual timetable, it will be September next year, but the government will make maximum efforts to make it happen earlier than that,” Choo Kyung-ho told Reuters on the sidelines of the Asian Development Bank annual meeting in Incheon, South Korea.

FTSE Russell put South Korea on its watch list in September last year for possible addition to WGBI. Barclays said it expected South Korean bonds to join the WGBI and estimated some $60 billion in passive flows over several quarters.

Choo also said that reviving a currency swap arrangement with Japan had not been discussed in meetings this week with his Japanese counterpart, although he expects to expand economic cooperation with Tokyo as diplomatic relations improve.

A previous bilateral foreign exchange swap agreement between South Korea and Japan expired and was not renewed amid diplomatic tensions between the two Asian economic powerhouses.

Choo said he still sees growth in Asia’s fourth-largest economy picking up in the latter half of the year, despite the central bank’s recent warning that growth for the whole of the year would be weaker than earlier projected.

He said the country’s exports to China have suffered from a mix of factors, including Beijing’s efforts to drive the economic recovery through domestic consumption, which has shifted focus to local production over imported goods.

He declined to say how soon he expects the country’s trade balance with China to return to a surplus but said the government would provide all available support to its export sector. (Reporting by Choonsik Yoo and Jihoon Lee; Editing by Sam Holmes)