The government decided to increase the mandatory investment ratio of domestic stocks in domestic investment-type Individual Savings Accounts (ISAs) to encourage more investment in domestic assets. It also plans to lift restrictions on purchasing 'Kimchi Bonds,' which are foreign currency-denominated bonds issued domestically, to increase demand for won currency exchange.
The Ministry of Strategy and Finance, the Financial Supervisory Service, the Bank of Korea, and the Financial Supervisory Service held a foreign exchange soundness council chaired by Vice Minister Bom Kim on the 9th and prepared an 'additional measure for improving foreign exchange supply and demand.' This action was taken to alleviate the upward pressure on the won-to-dollar exchange rate as individual investors’ stock purchases abroad have surged.
The government is establishing a domestic investment-type ISA, which has a two-fold larger tax-free limit compared to general investment-type ISAs, and raising the mandatory investment ratio for domestic stock funds included in this ISA to a minimum of 40% (the legal limit). The specific limit will be determined after consultations with relevant ministries.
A tax support package for enhancing the domestic stock market will also be re-launched. This includes ▲a 5% tax credit on the increase in shareholder return ▲lower tax rates on the increase in dividends ▲measures regarding ISA contribution limits and tax-free limits.
Additionally, the application procedure for tax exemption on government bonds for foreign investors will be simplified, and the scope of real-name and customer verification for consolidated government bond trading accounts will be clearly defined. Furthermore, safety measures for investments in overseas leverage exchange-traded products (ETPs) and on-market derivatives will also be promoted.
The government will also strengthen the foreign exchange inflow regulation relaxation policy announced last year. The aim is to alleviate the accumulated imbalance in the foreign exchange market (dollar demand superiority) by adjusting strict foreign exchange inflow regulations.
Accordingly, the risk hedge ratio limit for specialized investment corporations will be raised from the current 100% to 125%, and restrictions on the purchase of Kimchi Bonds (bonds issued in foreign currency such as dollars in the domestic bond market) for use in won will also be lifted. Restrictions on foreign currency borrowing in won through domestic bank overseas branches will also be eased.