A POSSIBLE upgrade to "developed" status for South Korea and China's Taiwan by MSCI Inc may not have lasting benefits for those markets' stocks, Citigroup Inc said yesterday.

"It is possibly better to be a big fish in a small pond rather than a small fish in a big pond," wrote analysts including Singapore-based Paul Chanin, in a market summary quoted by Bloomberg News. A promotion from the emerging-market indexes will probably attract "limited" net buying on those markets, Chanin said.

South Korea and China's Taiwan, which account for 29 percent of global emerging markets, would take up 2.6 percent of developed markets if they were upgraded, according to the report. FTSE Group, MSCI's smaller rival, said in September that it will likely promote South Korea to "developed" in 2008, while it said Taiwan still has a "lot to do."

An upgrade by MSCI would probably attract net buying of up to US$7.7 billion in South Korea and US$6.3 billion in Taiwan by funds that passively track the indexes, "hardly enough to radically change the investment landscape permanently," the brokerage said. More than US$3 trillion is benchmarked to MSCI's equity indexes, according to the company's Website.

Greater investor interest would be confined to a few large-cap stocks, the analysts wrote. "Only a handful of Korean and Taiwan names are large and liquid in a global context," they said.

In a separate report, JPMorgan Chase & Co lifted its recommendation on Taiwan to "overweight."