South Korean and Indian government bonds are set to join global index provider FTSE Russell in 2025, in a move that is expected to attract billions of dollars of foreign investment into their local bond markets.
ADVERTISEMENTGlobal financial market index provider, FTSE Russell, will include South Korean government bonds in the FTSE World Government Bond Index (WGBI) and Indian government bonds (IGBs) in its Emerging Markets Government Bond Index (EMGBI) after years of being on its watchlist.
The inclusion is expected to draw billions of dollars in foreign investments into the local bond markets.
FTSE Russell is owned by the London Stock Exchange Group (LSEG).
In a statement, it said: “The inclusion of nominal and inflation-linked local currency government bond markets in global FTSE fixed income indices is governed by the FTSE Fixed Income Country Classification Framework”, which is reviewed on a semi-annual basis.
Overhaul of the South Korean Financial Market Infrastructure
According to the announcement, the inclusion of South Korean government bonds will take effect in November 2025, with bond pricing sourced from the LSEG Pricing Service.
The projected impact of the inclusion is a 2.22% weight in the WGBI on a market value-weighted basis, making it the ninth largest in the index.
The top three weighted government bonds are those of the United States, Japan, and China, with weights of 40.39%, 10.17%, and 9.72%, respectively.
Since being placed on the FTSE watchlist in September 2022, several reforms have been implemented by South Korean market authorities to meet the required criteria.
Positive progress highlighted in the latest semi-annual review includes allowing third-party foreign exchange, extending South Korean won trading hours, enabling settlement through Euroclear and Clearstream, and addressing issues related to the Legal Entity Identifier registration scheme and the withholding tax exemption process.
With the inclusion, South Korean government bonds are expected to attract 90tn won (€61bn) in foreign investment, according to Bloomberg’s database.
Indian Government Bond Inclusion
Indian government bonds (IGBs) will be added to the EMGBI and regional Asian government bond indices over a six-month period, beginning in September 2025.
The projected weight is 9.35% of the index on a market value-weighted basis, which will be the second-largest, behind China at 57.85%.
FTSE’s inclusion of Indian sovereign bonds marks another milestone for foreign investors gaining access to Indian financial markets, following JP Morgan’s acceptance in June.
IGBs officially joined JP Morgan’s Government Bond Index-Emerging Markets (GBI-EM) on 26th June, with a one percentage point increase in weight each month until reaching a cap of 10%.
China, Indonesia, and Mexico also each have a maximum cap of 10% in the JP Morgan Global Bond Index – Emerging Market Global Diversified Index.
ADVERTISEMENTThe inclusion of Indian government bonds in these global emerging market indices sets the stage for significant financial inflows into the world’s fifth-largest economy, further signalling India’s growing presence in global markets.
Indian markets have garnered increased attention in recent years due to the country’s rapid economic growth, in contrast to the slowdown seen in other major economies.
India has also capitalised on its expanding services sector, particularly through tech giants. Apple, for instance, has shifted some manufacturing services to India from China amid ongoing geopolitical challenges.