Korea Has Raised 10% of Target for Stock-Market Rescue Fund
Korea Has Raised 10% of Target for Stock-Market Rescue Fund
(Bloomberg) -- South Korea has so far raised about one-tenth of the target for its stock-market stabilization fund and has yet to make any investments, Kang Shinwoo, the advisor for the fund, said in an interview.
The emergency fund aims to raise 10.7 trillion won ($8.77 billion) in total from local banks, brokerages and other financial institutions to support the nation’s equity market, according to a statement last month from the Financial Services Commission, the nation’s top policy-making body. The vehicle will raise funds through a so-called “capital call,” upon which investors provide a portion of the money rather than offering all at once. It will then invest in exchange-traded or index funds tracking major gauges such as the Kospi 200 Index.
Kang, who was formerly the chief investment officer of the country’s sovereign-wealth fund, Korea Investment Corp., has been appointed recently by the nation’s government to advise the management of the stock-market stabilization vehicle. The recent rally in the Kospi is the reason why it has yet to intervene in the stock market.
“There is no specific level in the Kospi that we are looking at before making any investments,” Kang said. “Even if the index falls further from here and remains range-bound, we may not utilize the fund immediately.”
The purpose of the vehicle isn’t to make a return but to support the market when it crashes, and its usage depends a lot on the velocity of the decline, he added.
The Kospi gained 1.6% on Thursday, taking its advance to 26% from a low in March, as retail investors have bought net 4.3 trillion won since then. In contrast, foreign investors have sold a net 5.6 trillion won during the period.
The South Korean government also plans to create a 20 trillion won fund to buy corporate debt and commercial paper to stabilize its bond market and provide 17.8 trillion won of liquidity for companies with poor credit.
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