South Korea plans 24-hour Won trading in globalization push

South Korea said it will allow 24-hour trading of its currency next year, the latest step in expanding international investors’ access to its markets and vying for a place in a major global stock index.

The Asian country will also ease restrictions on won trading between non-residents, its finance ministry said in a statement. The announcement came after President Lee Jae Myung outlined his vision for Korea’s capital markets at an event in New York on Thursday, where he pledged efforts “to ensure that foreign investors can benefit from the ‘Korea premium’.”

Lee stressed various measures to boost market transparency, improve corporate governance and reduce geopolitical risks.

“The FX market opening is to be implemented sometime next year,” Kim Jae Hwan, director general of the Finance Ministry, later said in a text message. “This measure reflects the government’s commitment to enhancing access to the Korean won market so that foreign investors won’t see any substantive difference compared with investing in other advanced economies.”

Lee has repeatedly pledged to improve accessibility for global investors and enhance confidence in Korea’s capital markets, including a goal to lift the Kospi stock benchmark to 5,000 points and secure inclusion in the MSCI Developed Markets Index. Among the reforms outlined are improved corporate governance and tougher sanctions on unfair trading practices.

A key challenge has been overcoming structural constraints in the FX market, seen as a prerequisite for Korea’s entry into the much-coveted MSCI index. An MSCI roadmap is expected before year-end, the finance ministry said.

“Once the FX market liberalisation is fully implemented, it should increase global liquidity of the won,” said Wee Khoon Chong, a strategist at BNY. “While it may be too early to expect foreign capital inflows given the distant timeline, this is viewed as a positive step forward in the series of capital market reforms.”

In July last year, Korea extended onshore won trading hours until 2 a.m. local time from 3:30 p.m. Meantime, the Bank of Korea intends to build a new settlement system capable of handling won payments on a 24-hour cycle.

Daily trading volume in the won spot market averaged $15.7 billion in the first eight months of this year, up from $11 billion for the whole of 2024, the Bank of Korea’s data show.

Separately, non-resident won trading is effectively limited due to reporting obligations and other regulatory hurdles. Planned legislative revisions would remove those barriers.

In its June market-classification review, MSCI stressed that fully open currency convertibility is essential for Korea to qualify as a developed market. The report also highlighted the need for capital controls to be scrapped, deeper and more liquid onshore and offshore markets, and narrower bid-ask spreads.

Key features of advanced FX markets, MSCI noted, include broad participation from global investors, transparent real-time pricing, reliable and efficient settlement infrastructure, and broad access to hedging tools.

Korea’s incremental measures, such as limited trading-hour extensions, do not fully “reflect current practices in developed markets,” the index provider said at the time.

Korean markets showed little enthusiasm about the newly announced FX liberalisation measures. The Kospi index fell as much as 2.3% on Friday morning, with a slide in US tech losses weighing on local chipmakers. The won also fell against the dollar, hitting at one point its weakest level since mid-May.

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