The net value of foreign equity fund assets held by South Koreans is about to surpass 20 trillion won (US$17.94 billion) largely due to the bullish global stock market and tax exemptions.
According to data by the Korea Financial Investment Association (KOFIA) on November 7, the net assets of foreign equity funds stood at 19.5 trillion won (US$17.5 billion) as of November 1. The figure increased 4.27 trillion won (US$3.83 billion) from the end of last year.
The net assets of foreign equity funds have fallen short of 20 trillion won (US$17.94 billion) after recording at 20.07 trillion won (US$18 billion) in 2013 and are expected to exceed 20 trillion won (US$17.94 billion) for the first time in four years and five months. The reasons why the figures are on the rise this year are that the world’s major stock markets show an upward trend and the tax exemptions on foreign equity funds will end at the end of the year.
As of the end of October, the U.S. and Chinese stock markets showed a 30 percent growth compared to the end of 2015. In addition, investors can subscribe to funds specializing in foreign stock investment, which can receive tax exemptions, with the limit of 30 million won (US$26,911) per person by December 31.
The number and the sales balance of tax-free foreign funds introduced in March last year were 570,000 and 2.46 trillion won (US$2.21 billion), respectively, as of the end of September. The sale proceeds in September stood at 355.9 billion won (US$319.22 million), reaching an all-time high.
The investment banking industry predicts that the net assets of foreign equity funds will show a continuous growth until the end of the year. An analyst at KB Asset Management, said, “As financial institutions are actively marketing foreign equity funds and the funds have good tax saving effects, their net assets will keep rapidly increasing in the future.”