Financial authorities and the securities industry predict small investors will increase their participation in the stock market, as officials are poised to open a registered space to trade over-the-counter stocks and vitalize funds for overseas investment.
The optimism is backed by the recent improved performance of overseas equity funds, which is seeing its highest investment levels in seven years, and the scheduled widening of the scope of nonlisted share trading.
In cooperation with the operator Korea Financial Investment Association, the Financial Supervisory Service is fine-tuning the timing with the launch of the second group, the KOFIA Over-The-Counter Bulletin Board ― expected to open in the coming months or weeks ― after the first K-OTCBB was launched in August 2014.
While the first group is composed of 125 financially sound nonlisted firms, more companies involving delisted ones could be included in the second group unless they still face 100 percent capital erosion, according to regulatory officials.
“In a benchmark of the OTCBB in the United States, retail investors have been allowed to trade nonlisted stocks easily in a far more transparent manner via offer prices on the bulletin board,” said an FSS official.
“Investors had to face high volatility or lack of transparency in buy-or-sell offer prices when they trade nonlisted stocks via private brokers on the Internet,” he said.
With the planned launch of the K-OTCBB’s second group, the authority and the association expect that more nonlisted shares will draw public interest. Meanwhile, some say the policy targeted securing a broader taxation base by levying capital gains taxes on over-the-counter stock sellers.
In addition, overseas equity funds, raised by domestic brokerage houses, saw a 629.6 billion won ($572.3 million) capital inflow in March ― an 83-month high since it peaked at 715.2 billion won in April 2008.
Amid the central bank’s record low benchmark yearly interest rate of 1.75 percent, overseas stock funds, aside from the stocks publicly traded on the Korea Exchange and the Kosdaq, are gaining popularity.
Between 2005 and 2007, overseas equity funds for Brazil, Russia, India and China were bullish in terms of customer attraction. But local investors backed off after they suffered huge losses in the wake of the 2008-09 global financial crisis.
By Kim Yon-se (kys@heraldcorp.com)
