By most measures, South Korea and Taiwan look like fully developed countries, but the MSCI won't consider including them in developed market stock indexes, keeping them stuck with emerging market status.
"We always think both markets -- Korea and Taiwan - are developed countries by any means. They are fast growing economies," Chia Chin-Ping, managing director at MSCI, told CNBC on Thursday. "From our perspective, though, in the classification of MSCI countries, we do place a significant consideration on the accessibility, i.e. how friendly is the market to international investors."
With over $8 trillion globally estimated to be passively tracking MSCI's indexes and around $1.4 trillion of that tied to the emerging markets index, a country's classification can result in significant changes in fund flows.
The main problems with Korea and Taiwan are that their currencies aren't freely convertible and they lack "all the conveniences in trading stocks," Chia said, citing technical issues with their exchanges.
MSCI took both countries off its list for potential inclusion as developed markets.
"So far, there hasn't been much progress on this issues and investor feedback has been always the same. So we decided to just take it down," Chia said. "That makes it simpler and reduces speculation in the market."