Regulators Plan Rule Changes to Allow Overseas Retail Access to Domestic ETFs
Barriers to foreign ETF investment will be abolished.
The Financial Services Commission (FSC) is overhauling its system to allow foreign investors to invest in domestic exchange-traded funds (ETFs). The plan is to continue the ‘Korea Premium’ trend by expanding the accessibility of overseas retail investors to the domestic capital market.
Lee Eog-weon, Chairman of the FSC, stated at the ‘Key Achievements of the First Year of State Affairs Meeting’ held at the Government Complex Seoul on May 21, “Beyond improving our domestic constitution, we will actively promote the globalization of the capital market where global funds and high-quality assets flow in.”
Currently, foreign retail investors can invest in domestic stocks through an omnibus account, but ETF investments are restricted. To expand this to ETFs, the FSC plans to announce a rule change soon, and also plans to push forward with a plan to implement it first for prepared operators through a no-action letter.
FSC Chairman Lee explained, “There is significant demand from overseas retail investors wanting to buy Korean stocks,” and added, “From April 26 to May 15, the cumulative trading volume of foreign omnibus accounts was approximately 5.8 trillion won (approximately $3.87 billion), and net purchases were at the level of 2.2 trillion won.”
Regarding the single-stock leverage products for Samsung Electronics and SK Hynix that are recently being pushed for introduction, he drew the line by stating there are no plans for further expansion.
Chairman Lee explained, “This is a measure to adjust the regulatory differences, where it is allowed overseas but not domestically, to align with global consistency,” and “The intention is not to actively expand specific products.”
He added, “We plan to apply naming regulations so they are not confused with general ETFs, and we will strengthen investor protection measures such as additional education, deposit, and underlying asset requirements.”
The FSC will also host ‘Korea Premium Week’ in September. It is a large-scale integrated investor relations (IR) event targeting overseas investors, similar to Japan’s ‘Japan Week’ and Taiwan’s ‘Taiwan Week.’
The FSC plans to consolidate overseas investor relations (IR) sessions, which are currently scattered by institution, and foster it into a global event representing the Korean capital market. The idea is to enhance the effect of attracting overseas funds by operating connected programs for a month in addition to the core event week.
Along with this, the system to prohibit duplicate listings in principle is also being promoted with the goal of implementation in July. The FSC plans to specify the listing screening standards focusing on the board of directors’ efforts to protect shareholders and the level of protection for the rights and interests of general shareholders.
Chairman Lee said, “Rather than a method of exceptionally allowing future high-tech industry sectors, we are considering an approach centered on the sufficiency of shareholder protection efforts and procedural standards.”
The FSC also disclosed the achievements of the capital market reform over the past year on this day.
According to the FSC, since the inauguration of the current administration, the KOSPI has risen from 2698.97 to 7981.41, and the market capitalization of the domestic stock market has expanded from 2,597 trillion won to 7,204 trillion won.
The FSC stated, “We have entered a structural turning point transitioning from a Korea discount to a premium,” and presented the one-strike-out for stock manipulation, the directors’ fiduciary duty to shareholders, and the mandatory cancellation of treasury shares as major achievements.
Jung Suk-yee
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