SEOUL, Jan. 31 (Korea Bizwire) — South Korea’s financial regulator said Monday it will beef up efforts to revamp the country’s capital market regulations in a way that helps them live up to “global standards” and enhances the protection of shareholders in local equity markets.
The plan is aimed at attracting more foreign investment by providing an investor friendly market environment and better protection in the stock markets known for the “Korea discount” that refers to the relatively low valuation of Korean stocks due to such factors as the North Korea threat, weak corporate governance and complex regulations.
In a report to President Yoon Suk Yeol on policy direction for this year, the Financial Services Commission (FSC) said it will seek to remove a decades-old system that requires foreigners to register their identities before investing in local stocks.
Since the requirement was introduced in 1992, complaints from critics have been rising that it makes foreigners’ investment more complex and cumbersome.
The FSC will also obligate firms listed on the local stock markets to provide regulatory filings in English “in phases” to enhance the understanding of corporate decisions and financial status among foreign investors.
In a bid to enhance shareholders’ rights and benefits, the FSC said it plans to revise the Capital Market Act in a way that lets people invest in equities after knowing when they would receive dividends.
Oversight over regulatory filings will also be strengthened as well on such issues as share buybacks, while the punishment will be toughened for violations of a rule that requires marked changes of stock holdings, including an acquisition of shares amounting to 5 percent or more of outstanding shares, to be reported, the FSC said.
Meanwhile, the FSC said it will put a top priority on engineering a “soft landing” in the real estate market as it cites the possibility of “project financing” going bad as one of the major risks facing the sector.
PF refers to lending based on a project’s future cash flows, mostly linked to construction.
Worries have arisen that PF-based lending could turn bad as home prices are slumping and borrowing costs have been on the rise in line with the central bank’s monetary tightening to tame inflation.
The regulator said it will also support the government’s efforts to nurture new growth engines and make the country one of the world’s top five exporters by providing 205 trillion won (US$166.7 billion) in policy financing, including 16 trillion won for exporters.