In April, global index provider FTSE Russell included South Korea in its flagship World Government Bond Index (WGBI). In response, foreign investors poured roughly KRW 15.1 trillion (USD 10.1 billion) into South Korean government debt, triggering celebrations in Seoul.

“2026 will be the first year our government bond market takes a leap forward to become a developed market, thanks to our inclusion in the WGBI,” finance minister Koo Yun-cheol told a meeting on May 19. “It will serve as an opportunity for our government bonds to establish themselves as a more stable and reliable investment asset for global investors.”

The development highlighted a dynamic playing out across Asia, demonstrating the power of global index providers to shake up national securities markets. Countries that meet the exacting standards of the index makers reap quick rewards. Markets that are downgraded can suffer just as dramatically.

In South Korea, the FTSE Russell move followed efforts by regulators to increase their bond market’s appeal to global investors. In its March 2024 review, the index provider raised South Korea’s market accessibility level to the rating required inclusion in the index.

Ethan Seo, head of global markets, BNP Paribas South Korea, said the country’s inclusion in the WGBI means that funds that track the index will have to take positions in South Korean debt, buttressing both government bonds and the won.

“Global passive funds flow would be a key component of upcoming inflow, and this inflow should be considered as a sticky and structural inflow to the local market,” he said.

Roheet Shah, head of dealer sales, Asia Pacific, at MarketAxess, added that investor sentiment toward Korean treasury bonds since the WGBI move was helping to absorb supply pressures.

“This is no longer a market traded by a select few,” Shah said. “Korea has developed a deep and diverse investor base, and with WGBI inclusion, it’s becoming firmly embedded in global portfolios.”

Vietnam’s benchmark VN Index jumped more than 4% on April 8, when FTSE Russell confirmed it would upgrade the communist country from a frontier market to a secondary emerging market on September 21. Secondary emerging markets are classified one level below advanced emerging markets. The announcement came after the index provider conducted an interim review in March.

Vietnam had implemented reforms to qualify for a FTSE upgrade, such as opening the market to foreign brokers. In 2024, it ended pre-funding trade rules that required overseas institutional investors to have the full amount of funds ready before purchasing Vietnamese stocks.

“The reclassification of Vietnam reflects the implementation of key market infrastructure enhancements,” David Sol, global head of policy at FTSE Russell, said in a statement. “The upgrade decision by FTSE would put Vietnam on par with China, India, the Philippines, and Indonesia,” Sol wrote.

Foreigners have snapped up some of the more than 20 stocks eligible for an FTSE index, from Vinamilk to steelmaker Hoa Phat. They are also buying shares of ineligible companies like electronics chain Mobile World.

However, there are still concerns of “index distortion” with passive inflows skewed toward dominant stocks like Vingroup and its property arm Vinhomes, EBC Financial Group said.

“Concentration is a structural constraint,” senior market analyst Sana ur Rehman said, “but it is being gradually diluted, and the upgrade itself is part of the solution.”

Rehman expects the market to diversify for at least two reasons. First, Vietnam’s government is trimming its stakes in some state enterprises. Second, a wave of listings is bringing large-cap options in retail, health, telecom and manufacturing, rather than just real estate and banking.

Vietcombank, consumer giant Masan and SSI Securities are among other stocks that will begin seeing inflows in September, according to forecasts by ACB Securities.

Index provider decisions do not always favor markets; sometimes they put markets and governments in difficult circumstances. Just look at Indonesia.

Indonesian equities plummeted on last Wednesday after Morgan Stanley Capital International (MSCI) removed six local companies from the domestic global standard index, following a quarterly review.

Outflows from the stock market could reach USD 1.0–1.7 billion, according to Harry Su, managing director of research at Samuel Sekuritas Indonesia.

As foreign investors flee the Indonesian market, they are impacting the rupiah, which last week weakened to an all-time low against the US dollar.

In January, MSCI announced it would stop adding Indonesian stocks to its emerging market indexes until this month due to insufficient transparency and free-float ratios. Indonesian stocks recorded a sharp decline on the day in January with the benchmark index recording a nearly 9% drop at one point.

“While there have been minor enhancements to IDX’s float data feed, investors highlighted that fundamental investability issues persist due to ongoing opacity in shareholding structures and concerns about possible coordinated trading behavior that undermines proper price formation,” MSCI said in January.

In April, Indonesian capital market authorities responded by lowering the ownership threshold at which shareholders must disclose their identities to 1% from 5%. It also raised the minimum free-float requirement to 15% from 7.5% and introduced two other reforms.

Were the authorities’ efforts to restore global investor confidence sufficient? MSCI’s removal of the six companies supplied the answer.

MSCI said it still is not adding Indonesian stocks to its emerging market indexes as it evaluates the consistency and effectiveness of the new policies, particularly those related to stakeholder transparency and the planned increase in minimum free-float requirements.

Other reforms under consideration by Indonesian authorities include an expansion of the classification system for institutional investors to 39 categories, up from nine, and publishing a high shareholding concentration list identifying companies whose ownership is dominated by a small group of shareholders, including affiliated parties.

The Indonesia Stock Exchange has also introduced adjustments to its flagship indexes; IDX30, LQ45, and IDX80, by excluding stocks listed on the high shareholding concentration list.

“The implementation of the transparency reform involves excluding stocks from the high shareholding concentration list as constituents of the IDX flagship index,” the exchange said.

Friderica Widyasari Dewi, chairwoman of the Financial Services Authority, said MSCI’s recognition of Indonesia’s market reform efforts reflects the effectiveness of the policies already rolled out.

Barito Renewables Energy and Dian Swastatika Sentosa, both MSCI-listed stocks on the IDX, have been included on the high shareholding concentration list.

Hasan Fawzi, OJK’s chief capital market supervisor, said several Indonesian stocks could face adjustments in the MSCI index. “Several stocks have been indicated and will undergo adjustments, either in their weighting or possibly be removed from the MSCI. This has been preceded by a response from investors,” Fawzi said.

Fawzi welcomed MSCI’s move, describing it as an early warning that has been well received by investors.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.

Note: KRW figures are converted to USD at rates of KRW 1504.94 = USD 1 based on estimates as of May 22, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.