SCI will promote Israel to developed markets status, but will keep South Korea classified as an emerging market, according to the final conclusions of its recent market reclassification analysis.

The global index provider has been conducting a public consultation on the status of five “bubble” countries over the past year, considering proposals to elevate Israel and South Korea to developed markets status, and push Kuwait, Qatar and the United Arab Emirates from frontier to emerging markets.

For the time being, only Israel made the grade; the other four countries will stay put.

Israel’s promotion will take place during MSCI’s May 2010 semiannual index review. As of March 31, 2009, Israel was the ninth-largest country in the MSCI Emerging Markets Index, with a 4.0% weight, just behind Mexico (4.7%) and well ahead of the No. 10 country, Chile (2.9%).

As for South Korea, MSCI says it will reevaluate the country’s status in 2010. The index provider said that the country still had a number of items to work on before it would qualify as a developed market, including full convertibility of the Korean won and the elimination of anticompetitive practices in the distribution of real-time market data in the country.

Reclassifying South Korea would have a major effect on the MSCI Emerging Markets Index, as Korea is the third-largest country in the index by weight (12.4%).

Taiwan—which holds the fourth-largest weight in the MSCI Emerging Markets Index, just behind South Korea—was not considered for promotion in 2009, but will also be included in the 2010 review.

Regarding the UAE and Qatar, MSCI seemed to be encouraged by progress made opening up those markets, but decided to stand pat with its frontier market rating for now. It said it will reevaluate their status in 2010.

By contrast, the index provider said that Kuwait faces too many market accessibility issues to be considered for promotion. It will stay in the frontier markets index and will not be included in the list of countries under review in 2010.

The MSCI Emerging Markets Index is the leading emerging markets index in the U.S. It’s tracked by two of the 20 largest ETFs, the $31 billion iShares MSCI Emerging Markets ETF (NYSE Arca: EEM) and the $8.8 billion Vanguard Emerging Markets ETF (NYSE Arca: VWO).