Koreans catch overseas funds bug
Amid the new-found passion for mutual funds, Koreans put as much as 100 billion won ($106.8 million) per day into funds invested in local stock markets this year, according to a local brokerage firm. But in terms of growth, mutual funds invested overseas saw an even larger increase, said Lee Yuna, a researcher at Samsung Securities.She said the amount of money in overseas fund accounts increased more than seven times in 2007, from 6 trillion won at the end of last year to 43 trillion won as of Wednesday.
“Tax breaks on overseas equity funds partly contributed to the expansion,” Lee said.
In June, the government scrapped a 15 percent of capital gains tax imposed on overseas equity funds in a bid to encourage global investment. There has never been a similar tax on domestic funds. Lee said the increase in foreign equity funds was also the result of a change in the mindset of Korean investors.
“Koreans began to realize that the local market is very small and they need to diversify their portfolios into other global markets,” Lee said. “This year marks the genuine beginning when Korean investors began to globalize their mindsets.”
Lee said most of the overseas equity funds that recorded sound profits this year were invested in emerging markets. The funds invested in advanced markets did not perform as well, she said.
In particular, funds invested in China and India brought profits as high as 60 percent, she said. Funds invested in other Asian countries and Eastern European countries also reaped more than 20 percent in profit compared to the end of last year.
In a year-in-review report of the equity fund market in Korea released yesterday, Lee said the amount of money in domestic mutual fund accounts rose by 25 trillion won from 40 trillion won at the end of last year to 65 trillion won as of Wednesday.
This means slightly more than 100 billion won flowed into these funds every day. There were 246 trading days in Korea this year until Wednesday. The benchmark Kospi and secondary Kosdaq had their final business day of the year yesterday.
By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
with the Korea JoongAng Daily
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