An extra 60 trillion won ($54.91 billion) worth of foreign funds could flow into the South Korean stock market if the nation joins the Morgan Stanley Capital Investment Advanced Market Index, a market expert suggested Tuesday.

Korea, the world’s 10th-largest exporter, ranked No. 9 in terms of stock market capitalization, making it a candidate for the MSCI list of developed markets, said Lee Hyo-seob, a senior research fellow at the Korea Capital Market Institute, at a forum co-hosted by the Korea Exchange and the Korea Financial Investment Association.

“If the country excludes from the MSCI EM Index, nearly 140 trillion won will outflow from the market. In contrast, if it newly joins the MSCI AM Index, the amount of net inflow is expected to be about 200 trillion won,” he said. “Which means that about a 60 trillion won worth of foreign capital will likely to draw in to the local market.”

The MSCI has left Korea’s status unchanged since 2009 due to the rigidity of its investor identification systems and lack of an active offshore market for currency convertibility. The index compiler has suggested ways to remedy those problems, but only limited improvements have been made so far as the government remains cautious about foreign exchange market stability.

Pension funds’ stock investment strategies concerning environmental, social and governance factors could also push the rise of both Kospi and the tech-heavy Kosdaq, Lee added.

Kospi hitting a fresh high this year, buttressed by local retail investors, reflects a shift of individual capital from safe investments such as real estate to financial markets, said Kim Hak-kyun, head of Shinyoung Securities’ research center.

Buoyed by the rosy outlook of local listed firms’ better business performance and manufacturing businesses’ competitiveness, Korean stock indexes are likely to continue their rallies next year.

“The rapid rebound of local stocks was largely attributed to the power of retail investors this year. Talking about Korean stocks’ performance next year, they are likely to perform better than the global markets on the average,” he said. “The 12-month price-earnings ratio in the Kospi market is likely to reach an all-time high of 13.7 times in the following year, backed by the listed firms’ improved performance by 45 percent.”

By Jie Ye-eun (yeeun@heraldcorp.com)