State Plans Stock Buys

The government announced measures to boost Seoul stock markets on Wednesday, but investors were unimpressed, as the main stock price index declined to below 500 for the first time in more than two years.

Deputy Minister of Finance and Economy Kim Jin-pyo; the vice chairman of the Financial Supervisory Commission, Yoo Ji-chang, and the Bank of Korea vice president Park Cheul agreed, in Wednesday's urgent financial policy meeting, to expand the stock investments of state-run pension and postal funds to 6 trillion won ($4.4 billion) this year.

The government planned to pour 800 billion won into the market in April, as a first step. Government holdings in stocks are currently worth 2.2 trillion won.

The officials also agreed that investors who hold shares worth up to 300 billion won for a year or longer will be exempted from the 10 percent tax on stock dividends, and to introduce a system of quarterly dividend payments.

"While interest rates stay low, we intend to lure stable long-term investment to the stock market through these measures," said Mr. Kim. "The necessary amendments to relevant tax and securities trade laws will pass an extra session of the National Assembly scheduled in April."

But the stock market responded coolly. The Korea Composite Stock Price Index lost 9.57 points, or 1.90 percent, to close at 493.69, its lowest in 26 months. The won, too, continued its slide, closing at 1,365.20 to the dollar, up 21.50 won. (Related Article, Page 6)

"The government did not design a new measure but advanced implementation of already existing policies," said an analyst at Daewoo Securities.

A number of analysts had high opinions of the government's measures, though. "It is right to add cash flow to the stock market through expanding state-run funds' investments, as it is difficult to find other proper measures," said Rhee Nam-uh, an executive at Samsung Securities.

"The dividend tax exemption and the quarterly dividend payment system will enhance the long-term liquidity supply in stock markets," said Sung Keum-sung, an executive at Hyundai Investment management.

by Lee Chul-ho