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Market watchers are paying keen attention as to whether Korea will be included next week in the World Government Bond Index (WGBI), a global benchmark for the sovereign income market.

The index will be announced on Oct. 8 by the London-based Financial Times Stock Exchange (FTSE) Russell, a global index provider. The market capitalization-weighted bond index consists of the government bond markets of multiple economies.

Also drawing attention is whether the country will be classified as a watch list country, a grounds for delisting from the FTSE index. At issue is Korea's short selling ban. The overarching ban will be lifted late next March, with only a ban remaining on naked short selling, as revised by the National Assembly.

The FTSE index classifies the Korean equity market as developed, unlike Morgan Stanley Capital International (MSCI), which still classifies it as an emerging market. U.S. funds track MSCI indexes, whereas European funds do FTSE indexes.

According to market sources, Korea's potential inclusion in the WGBI this year will follow three previous failed attempts.

Between six months and a full year will be needed thereafter for the full inclusion. About $50 billion (65 trillion won) of investment funds will find its way into the Korean bond market.

Many expect inclusion to be a strong possibility, given about two years have passed since Korea was put on the watch list in September 2022.

Further fueling optimism is the necessary institutional frameworks established to bolster bond market accessibility, a key inclusion criterion.

Also at play is global investor sentiment, as surveyed by the index tracker.

The inclusion can be postponed yet again if survey respondents say the country's market accessibility falls short of global standards.

HSBC, a global banking powerhouse, advocates for Korea's inclusion, as underpinned by the prospect of upgrades in its market accessibility rating.

Apart from the sovereign index, investor interests extend to the resumption of short selling in the context of Korea making the MSCI listing.

Financial Services Commission Vice Chairman Kim So-young said last December that eliminating naked short selling is a task far more pressing than the country making the MSCI World list.

The two major issues will be pursued under the long-term goal of advancing the country's financial system, but MSCI listing will be at best a "fortunate byproduct" of Korea's capital market system upgrade, he said.

"Our goal is to promote healthy gains for investors, who then will help listed firms with their operating funds. This, in turn, will power the growth of the industries and the economy in a virtuous cycle. Those are our objectives," he said at the time.

Korea banned short selling on Nov. 6 last year, prompted by cases of BNP Paribas and HSBC engaging in illegal naked short selling worth a combined 56 billion won.