Kiwoom Securities said on the 10th that it will expand the service coverage of its "hedging products for individual investors in overseas stocks."
Kiwoom Securities' hedging product lets customers lock in a contract exchange rate to be applied at a specific point in the future for part of the valuation amount of their overseas stocks, so they can manage exchange-rate volatility risks when investing in overseas asset.
Earlier, Kiwoom Securities introduced the product last month for individual professional investors in line with the government's foreign exchange market stabilization measures and capital market revitalization policy.
To ensure market settlement and risk management, it was initially offered only to professional investors, but the company has now broadened it to retail investors after enhancing the product structure and investor protection system.
The product structure remains the same. Customers can apply for up to 50% of the valuation amount of their overseas stocks, after which it is fixed at the contract exchange rate notified by Kiwoom Securities.
On the maturity settlement date or early termination date of the hedged amount, the profit or loss, calculated as the difference between the predetermined contract exchange rate and the settlement exchange rate on the settlement date, is converted into dollars and settled into the deposit balance.
However, depending on exchange rates and underlying asset price fluctuations, losses may exceed the principal invested.
Tax benefits apply as before. Under revisions to the Act on Restriction on Special Cases Concerning Taxation and the Special Tax for Rural Development, the deductible amount has been raised to 5% of the investment in the hedging product from capital gains on overseas stocks.
Each individual can receive a reduction benefit of up to 5 million won. The investment amount in the hedging product is calculated as the average divided by the number of days the product is held. The maximum eligible amount is based on the valuation amount of overseas stocks held on Dec. 23 last year.
Kiwoom Securities said, "With this product launch, many individual investors can now directly use exchange-rate risk management tools that had long been considered the exclusive domain of institutional investors."
Kiwoom Securities plans to continue enhancing its services while strengthening its investor protection system.
A Kiwoom Securities official said, "Through this expansion, more investors will be able to systematically manage exchange-rate volatility risks," adding, "We will continue to introduce innovative financial services that put investor protection first and respond to government policies."