Source: Royal Trust, Global Exchange, Spring 1996
© Copyright 1996 , Royal Trust Corporation of Canada. All rights reserved. Distributed by permission of the copyright owner.
No longer an economic island , South Korea has opened to global trade and investment. Chaebols (conglomerates) have transformed Hyundai, Daewoo, Samsung and Luck Gold Star into international brand leaders. Korea is embracing privatization and facilitating access to foreign capital.
North Asia, Royal Bank of Canada
In the decade ending 1995, South Korea's growth of 7.8% per annum was second only to Thailand (8.2%) - far outpacing the 1.8% averaged by established industrial companies. Since the Seoul bourse was opened to foreigners in January 1992, the net inflow of equity investment has reached USD 12.4 billion. Foreign investors have gained access by slow degrees over the past 15 years, as shown below.
Capital Markets Open to Foreigners
| Early 1980's |
International Investment Trusts (i.e. funds domiciled and regulated in South Korea but marketed abroad) established to allow indirect foreign portfolio investment. |
|---|---|
| 1985 |
Select South Korean firms allowed to issue convertible bonds and depository receipts overseas. |
| 1992 |
Foreign institutional investors first allowed to invest directly in equities. |
| 1994 |
Entrustment Guarantee Deposit (EGD) rule required foreigners to
partially pre-fund trades at broker. Foreign shareholder limits raised. Bond market partly opened to foreigners. |
| July 1, 1995 |
Investment application process streamlined Foreign shareholder limits raise. |
| April 1, 1996 |
Foreign shareholder limits raised again. |
High interest rates and corruption scandals buffeted the stock market triggering a 15% drop in 1995 - despite 35% growth in earnings per share. However, authorities hope that strong macroeconomic fundamentals and market reforms will restore investor confidence. Economists project 7.5% growth in 1996, while country analysts rank South Korea among the safest emerging markets (4th out of 25) - despite military threats north of the 38th parallel and uneasy relations with China.
The complete article by Royal Trust - covers Market Entry Requirements, Investment Restrictions, Currency Controls and more - is available to Yearbook subscribers at Republic of Korea..
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