ID :
200804
Fri, 08/12/2011 - 05:38
Auther :
Shortlink :
http://m.oananews.org//node/200804
The shortlink copeid
Watchdog seeks to stem excessive foreign capital flows
SEOUL (Yonhap) - South Korea's financial watchdog is mulling measures, such as tax benefits for long-term investments, to counter volatility stemming from excessive foreign capital flows, officials said Friday.
The move comes as the country's stock market has been on a roller coaster this week, stung by the first-ever downgrade of the U.S. credit rating and growing worries over the European debt crisis. Foreigners have extended their selling streak to an eighth session, prompting the main stock index to fall around 17 percent.
The Financial Services Commission (FSC), the country's top financial regulator, is reviewing a number of measures to prevent excessive fluctuations in the local market by attracting foreigners to invest in long-term products, officials said.
"Instead of tightening regulations, it is urgent to create a safety device that can counter foreigners' (excessive capital flows)," said an official, "We will look into several measures. Giving tax benefits is one idea."
The Korea Financial Investment Association has asked the finance ministry and the financial watchdog to review a plan to give tax benefits to long-term investment funds.
Efforts to reduce the side effects of foreigners' excessive capital flows come amid growing alarms that they can dent local financial stability.
"Setting up a safety device against drastic foreign capital flow is an urgent priority. Since 2008 we have been stepping up efforts in various ways," FSC Chairman Kim Seok-dong said in a radio program on Thursday, adding that foreigners account for one-third of trading in the local stock market.
On Tuesday, the FSC imposed a ban on short selling of all local stocks listed on the main and the secondary tech-heavy KOSDAQ markets for three months. Short selling is the sale of shares by borrowing them in anticipation of price falls.
At the height of the 2008 global financial crisis, South Korea imposed a temporary ban on short selling in an effort to prevent the trading practice from battering the local bourse. In June 2009, the FSC lifted the ban on short selling of non-financial stocks.
Foreigners' short selling recently quadrupled to around a daily average of 400 billion won (US$371 million).
The move comes as the country's stock market has been on a roller coaster this week, stung by the first-ever downgrade of the U.S. credit rating and growing worries over the European debt crisis. Foreigners have extended their selling streak to an eighth session, prompting the main stock index to fall around 17 percent.
The Financial Services Commission (FSC), the country's top financial regulator, is reviewing a number of measures to prevent excessive fluctuations in the local market by attracting foreigners to invest in long-term products, officials said.
"Instead of tightening regulations, it is urgent to create a safety device that can counter foreigners' (excessive capital flows)," said an official, "We will look into several measures. Giving tax benefits is one idea."
The Korea Financial Investment Association has asked the finance ministry and the financial watchdog to review a plan to give tax benefits to long-term investment funds.
Efforts to reduce the side effects of foreigners' excessive capital flows come amid growing alarms that they can dent local financial stability.
"Setting up a safety device against drastic foreign capital flow is an urgent priority. Since 2008 we have been stepping up efforts in various ways," FSC Chairman Kim Seok-dong said in a radio program on Thursday, adding that foreigners account for one-third of trading in the local stock market.
On Tuesday, the FSC imposed a ban on short selling of all local stocks listed on the main and the secondary tech-heavy KOSDAQ markets for three months. Short selling is the sale of shares by borrowing them in anticipation of price falls.
At the height of the 2008 global financial crisis, South Korea imposed a temporary ban on short selling in an effort to prevent the trading practice from battering the local bourse. In June 2009, the FSC lifted the ban on short selling of non-financial stocks.
Foreigners' short selling recently quadrupled to around a daily average of 400 billion won (US$371 million).
