Starting on Dec. 14, the foreign investor registration system, which was considered one of the causes of the “Korea Discount,” or the undervaluation of the South Korean stock market, will be abolished.
According to the financial investment industry on Dec. 12, the “Enforcement Decree of the Capital Market and Financial Investment Business Act,” containing the abolition of the foreign investor registration system, will be implemented from the Dec. 14. In the future, foreign investors will be able to open accounts directly with securities companies without the need for prior registration with the Financial Supervisory Service. Foreign corporations will require the standardized ID, known as the Legal Entity Identifier (LEI), while individuals will only need a passport number.
The inconvenience of pre-registering personal information with the financial authorities will be eliminated. For global asset management firms, the procedures and costs associated with the trading and settlement of each fund will disappear. Individual and small to medium-sized institutional investors will find relief from the inconvenience of having to designate separate accounts and custodial institutions in South Korea.
With the abolition of the foreign investor registration system after more than 31 years, there is an expectation of short-term effects in the securities market. However, prevailing opinions suggest that it might be challenging to see a significant influx of foreign investment that could impact the market. Ultimately, the analysis indicates that it is crucial to enhance the attractiveness of the domestic stock market to achieve a virtuous cycle.
The situation in neighboring countries is not entirely positive, especially considering the high dependency of the South Korean economy on China. As a result, the value of the Korean won tends to move in sync with the movements of the Chinese yuan.