The government blamed the sharp won weakness on so-called "seohak ants" (overseas stock investors) and went so far as to roll out a "return of seohak ants" plan that offers tax benefits to investors who sell U.S. stocks and buy Korean stocks. But there are concerns that the policy effect could be blunted as the level of interest paid on dollars held in securities accounts has recently risen.
According to the industry on the 6th, since the new year more securities firms have begun paying relatively high interest (usage fees) on foreign-currency deposits. In particular, Meritz Securities, Mirae Asset Securities, and Kiwoom Securities are offering an annual rate of up to 2% on deposits with an average U.S. dollar balance of $100 to $1,000.
In particular, Meritz Securities is paying industry-leading interest by setting an annual rate of 0.8% based on an average balance of $5,000. Mirae Asset Securities' bold move also stands out. Until just recently, it applied a negligible annual interest rate of 0.01% to deposits of $1,000 or less, but from this year it sharply raised that to 2% per year.
By contrast, Samsung Securities, KB Securities, and Shinhan Investment's usage rates on foreign-currency deposits remain low, at 0.1% to 0.3%, highlighting a clear gap in interest payments even among major firms.
Securities firms pay a kind of interest, called a usage fee, on "deposits," which are idle funds that investors leave in accounts to trade stocks. Until now, securities firms had entrusted customers' deposits to Korea Securities Finance and others to earn operating revenue, while paying investors only token interest, drawing criticism that they were "fattening themselves on customer money."
But the mood shifted rapidly after the financial authorities stepped in. The Financial Supervisory Service and the Korea Financial Investment Association last year prepared best-practice standards for calculating investor deposit usage rates and recommended that usage fees for foreign-currency deposits also be calculated under reasonable and transparent standards, the same as for won deposits.
The problem is that as more securities firms pay interest on foreign-currency deposits and the interest level rises, the incentive has grown for seohak ants to keep their dollars off the market. This could directly clash with the authorities' policy stance of releasing individuals' dollar holdings into the market to ease the won depreciation trend.
To defend against the surging won-dollar exchange rate, the financial authorities have zeroed in on securities firms' marketing that encourages overseas stock investing and even put a tax-exempt card on the table, urging a "U-turn from the U.S. market to the Korean stock market." Last month, the government announced a plan to grant tiered capital gains tax reductions, capped at 50 million won per person in overseas stock sales, through a "return-to-home market account" (RIA). The aim is to stabilize the exchange rate and boost the domestic stock market.
However, as foreign-currency deposit rates have risen to attractive levels, the situation has become tangled. From investors' perspective, simply "parking" dollars in their accounts without converting to won can now yield solid interest income. For this reason, some say the FSS's sloppy response—blaming the exchange rate, which reflects Korea's broader economic and industrial conditions, solely on seohak ants—has become self-contradictory.