South Korea is deregulating its domestic financial markets in an attempt to attract more foreign investors as it seeks to achieve its long-standing goal of graduating from MSCI’s developed market status.
The government will eliminate complicated registration requirements for foreign investors to trade Korean stocks. It also allows the offering of security tokens (digital forms of stocks and bonds) to advance the digital asset market.
By gaining upgraded status and seeing its shares included in the global equity benchmark, the MSCI World Index, South Korea hopes to attract more long-term foreign capital flows to its domestic market. I hope
Foreigners will be allowed to invest in local capital markets using internationally recognized identification documents such as passports, according to Financial Services Commission Chairman Kim Joo-hyun.
The country’s top financial regulator also said officials would come up with a secure trading system for security tokens to better protect investors after the country was shaken by the collapse of several prominent cryptocurrency groups. rice field.
“This year we will try to meet global standards for capital markets,” Kim said at a meeting with regulators and financial market executives.
“We expect an investment climate that meets global standards will help increase foreign investment in the domestic market and enhance the international standing of the capital market.”
Finance Minister Choo Kyung-ho said earlier this month that trading hours in the foreign exchange market would be extended to 2 a.m. from the second half of 2024 at the earliest. The country’s foreign exchange market is currently open from 9am to 3:30pm.
As part of its efforts to make the country’s capital market more accessible to foreign investors, Choo has announced that it will impose a significant regulation on large listed companies with over KRW 10 trillion ($8.1 billion) in assets from 2024. It said the government would require documents to be submitted in English.
South Korea has been classified as an emerging market by index maker MSCI, largely due to South Korea’s refusal to allow offshore trading of the South Korean won and the complicated registration process for foreign investors.
The government is also looking to improve South Korea’s bond market conditions for foreign investors to be included in the World Government Bond Index.
Global index provider FTSE Russell added South Korea to its watch list for possible index inclusion in September following South Korea’s decision to cut taxes on foreign bond investments.
Experts welcomed the deregulation move, saying it would increase foreign access to domestic capital markets. But they warned that the world’s 10th largest economy must allow offshore trading in the won if it is to win an upgrade from MSCI.
“This move will be welcomed by foreign investors,” said Hwang Sewoon, a researcher at the Korea Institute of Capital Markets.
“However, with the emotional scars of the Asian financial crisis still lingering, officials still fear losing full control over foreign exchange trading, so they have decided against upgrading MSCI to allow offshore trading in the won. It will take time to remove the major barriers.”
South Korea still bans offshore trading of the South Korean won, but most other developed countries, including Japan, Canada, Australia and New Zealand, allow offshore trading of their currencies, Hwang said.
South Korea has also banned foreign investors from directly participating in the local forex market, but this ban is expected to be lifted soon.