Few Hurrahs For State Funds As Stock Savior

Government measures to encourage state pension funds and other state-run funds to increase their stock portfolios and enjoy the tax benefits are aimed at stabilizing the country's financial markets.

The government has estimated that pension funds and postal savings will pour a total of 6.8 trillion won ($5.1 billion) into the stock market this year, hoping that the move will ease investors' jitters.

But analysts said the measures were "minimal" and thus would not produce the desired results any time soon.

The nation's four-largest pension and postal savings funds have 2.5 trillion won in stock holdings.

Given that the state-controlled National Pension Corp. and postal savings funds already are exempt from a 0.3-percent securities transactions tax, the actual amount of stock investment subject to the tax benefit stands short of 300 billion won, they said.

They estimated that pension funds would be able to save just a little more than 1 billion won in taxes.

Even an official at the Ministry of Finance and Economy admitted that the tax exemption would not have an immediate impact on the local stock market.

Contrary to the government's intentions, the market and pension-fund managers have not been enthusiastic about the measures.

After the announcement Tuesday of more stock investment by pension funds and the tax benefits on transactions, the benchmark Korea Composite Stock Price Index shed 1.3 percent to 491.21.

"Investors do not expect too much from the government's measures because they were not very much different from what was announced in the past," said Lee Jong-woo, an investment strategist at Daewoo Securities Co.

An official at the Nation Pension Corp. commented, "We understand that the government has to use pension funds to boost the sagging stock market at a time when investment trust companies have become weak. But pension funds can't take a risky plunge."

by Chung Jeh-won