The government introduces measures to curb FX market volatility caused by retail investors’ foreign exchange demand.
Kimchi Bond regulations relaxed to encourage foreign financial firms' participation.
Domestic companies allowed to borrow USD abroad and convert it for local investment.
The domestic investment-type ISA’s minimum allocation to Korean equities will be raised above 40%.
Tax incentives for shareholder returns and eased foreign investor access to Korean bonds are also planned.
Opinion
Encouraging retail capital inflows into domestic markets and expanding Kimchi Bond usage could help stabilize the FX market. However, the interest rate gap between the U.S. and South Korea may limit the effectiveness of these policies, requiring further adjustments.
Core Sell Point
While government efforts may support exchange rate stability, their effectiveness remains uncertain given the U.S.-Korea interest rate differential, highlighting the need for complementary measures.
The South Korean government has unveiled new measures to mitigate upward pressure on the KRW-USD exchange rate, driven by retail investors’ increasing foreign investments ("Seohak Ants"). The key policies aim to enhance capital circulation within domestic financial markets and redirect investment flows back into Korea.
Kimchi Bond Regulation Eased
Foreign financial institutions will be allowed to purchase Kimchi Bonds (foreign currency-denominated bonds issued by Korean firms) for KRW conversion purposes.
Domestic corporations will now be permitted to borrow foreign currency from Korean banks’ overseas branches, then convert it into KRW for local facility investments.
Expansion of Domestic Investment ISA
The mandatory domestic equity fund allocation in the domestic investment-type ISA (Individual Savings Account) will be raised from 40% to encourage more retail investment in local markets.
This ISA offers double the tax-free allowance compared to general ISAs, incentivizing investors to keep their capital in domestic assets.
The final investment threshold will be determined through inter-agency discussions.
Additional Market-Stimulating Policies
Tax incentives for corporate shareholder returns will be reintroduced.
Foreign investors’ tax exemption process for Korean government bond investments will be simplified to attract more overseas capital.
[Compliance Note]
All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.
The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.
Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
