Seo Yuseok, Chairman of the Korea Financial Investment Association, "Capital Market Opportunities... Will Stop 'Money Move' from Deposits"

[Asia Economy Reporter Park So-yeon] Seo Yoo-seok, Chairman of the Korea Financial Investment Association, expressed confidence by stating, "The money move into deposits cannot continue indefinitely," and "From the perspective of the economy and investment, 2023 will be a year where crisis and opportunity coexist." He then announced four key tasks for the recovery of the stagnant capital market.

At the New Year's meeting with the press corps held on the 17th in Yeouido, Seoul, Chairman Seo said, "Last year, the KOSPI fell more than 20% from the beginning of the year (2988), making it the largest decline among the G20 countries except for Russia, which is at war." He added, "While it is difficult to predict short-term market conditions, this also means that mid- to long-term opportunities are opening up."

He identified the four key tasks for the Korea Financial Investment Association this year as ▲ overcoming liquidity crises ▲ advancing national asset management ▲ easing regulations related to the financial investment industry ▲ and protecting investors.

Chairman Seo mentioned, "Due to the prolonged global pandemic and the Ukraine war, inflation, rapid interest rate hikes, and resulting funding shortages, both domestic and international capital markets and real estate markets, as well as the real economy, are experiencing stagnation."

He expressed concern, saying, "There are multiple challenges such as the contraction of the private equity fund market and declining investor confidence, continuous stagnation of public funds, a sharp drop in stock trading volume, and real estate project financing (PF) issues faced by securities companies."

He reported that recently, market conditions have shown signs of slight stabilization. Chairman Seo said, "As a result of efforts by government authorities including the Financial Services Commission to overcome the crisis, short-term funding markets such as corporate bonds and commercial paper (CP) interest rates have recently stabilized."

The 91-day CP interest rate adjusted from 5.54% at the end of last year to 4.86% as of the 16th of this month. The 3-year corporate bond (AA-) rate also declined from 5.662% to 4.661% during the same period.

He also announced active policy proposals for advancing asset management. Chairman Seo said, "As of the end of 2021, the number of stock investors was 13.84 million, increasing annually from 5.05 million in 2017," adding, "The capital market has a significant impact on the lives of the people and household economy."

Chairman Seo emphasized that market activation policies such as tax support for long-term stock and bond investments and tax-exempt long-term investment funds are urgently needed, and he plans to actively propose these to the government.

He also forecasted the revival of the stagnant public fund market.

He promised, "We will promote the introduction of tax-exempt long-term investment funds and policies to revitalize public funds, and support asset management companies in launching new products such as foreign currency-denominated money market funds (MMFs) and performance-linked management fee funds."

He stated plans to improve the system to enhance the international consistency of domestic ETF regulations in line with the rapid growth of the ETF market.

He also declared that private equity funds will be enabled to lead innovation in the capital market again.

Chairman Seo said, "We will strengthen the custody infrastructure, including expanding direct custody by prime brokers, and thoroughly review the entire private equity fund regulatory system to improve elements that hinder industrial development and devise sustainable development plans."

Regarding high-quality private equity funds investing in areas difficult for the general public to access, such as social overhead capital and real asset investments, the plan is to expand investment opportunities to general investors through fund of funds.

He also emphasized, "This year will be the first year of the 'Great Money Move' into the private pension market."

He stressed the urgency of 'activating private pensions,' which complement public pensions, and said he would support improving private pension returns so that private pensions can share part of the national retirement income burden.

Regarding the 'financial investment income tax,' a dedicated task force (TF) will be formed for thorough review. Chairman Seo said, "We will seek a reasonable solution to the taxation issues of private equity fund dividend income from the perspective of tax rationalization."

On easing regulations related to the financial investment industry, he said, "We will review regulations overall, including those on complex products, leveraged ETFs, and financial product risk rating systems, and if there are unreasonable parts that do not fit the currently stagnant capital market, we will actively propose regulatory easing to the government."

He also plans to prepare specific institutional improvement measures for the advancement of the IPO market, such as allowing pre-demand surveys targeting institutional investors, in cooperation with the industry. Regarding investor protection, he said they will support strengthening internal controls of member companies and implement more efficient and practical self-regulation.

Meanwhile, the Korea Financial Investment Association plans to host the annual meeting of the International Council of Securities Associations (ICSA) in Seoul from June 18 to 20 this year.