As Western markets tremble, there’s no better time than now to start investing in Korea.
Whether you’ve just finished paying off your student loans back home or you’re already established in a career with an ample income, it’s never too soon to think about financial security. And the easiest way to secure that (short of winning the lottery) is through investing.
Can foreigners invest in Korea?
Most of the time, the question people ask is, ‘Can foreigners invest in Korea?’ The answer is yes!
Investing in Korea is very much the same as investing in any market. The variety of investment vehicles is actually quite staggering and the products being offered by different institutions have a lot of similarities. Language remains the largest barrier limiting what you can find here.
Why invest in South Korea?
The performance of the KOSPI (Korea Composite Stock Price Index) since the 2008 crash has been quite impressive. The KOSPI has regained all of its losses and is poised to set all-time highs in 2011. Also making your investments more valuable, the Korean won has steadily increased in value from a low of W1,250/$US in June to a current rate of about W1,130/$US.
Another answer to the question of why to invest in South Korea is that there is no capital gains tax in Korea, unlike Canada, the US, or England (where such taxes range from 15-25%). Commissions on trades are also very reasonable at around 0.5% of the transaction amount and lower on those done through the internet trading platform.
How to Invest in Korean Stock Market for Foreigners
So you want to be the Gordon Gecko of the KOSPI day traders? Well, put those fantasies on hold, or at least until you get yourself set up. The requirements are quite simple. Almost every major bank has a securities arm, but their English offerings are very limited.
Daewoo Securities has stock trading services exclusively in English while Samsung Securities has a superior online trading platform but no single person dedicated to English services. There are a dozen other securities companies (known as jeunggweon 정권 in Korean) that offer services; however, you may need Korean help at the initial stages.
Depending on your level of involvement, you may want to have a Korean stock broker contact you directly and recommend stock picks for you. However, if you have the itch to trade online yourself, there are computer interfaces available for you to do this. This should include both a trading and charting platform. Securities companies also have their own daily reports and research that they do on each industry and specific stocks. This information will give you a better feel for the market.
Are you a trader or an investor? Are you in this for a quick buck or for the long haul? Although it’s not usually as black-or-white as that, these do represent attitudes that determine how you should analyze your stocks. A long-term view would require more fundamental analysis (balance sheets, financial statements, and so on) while a short-term investor (that is, a trader) would prefer to study stock charts to determine the trading pattern, otherwise known as technical analysis. Neither approach is perfect, but they do provide you with helpful guidelines for your research.
Getting set up is relatively simple. Securities companies require a valid ARC (Alien Registration Card) and a passport to get started. If you’re not a resident, then you will need to get an investment registration certificate from the Korean FSS (Financial Supervisory Service) through a local bank, securities firm, or law firm in order to open a trading account.
Of course, stock trading is only one of many services offered by securities companies. They also offer mutual funds, bond offerings or funds managed by the firm.
Asset management companies can offer the hands-off approach that many investors prefer. With a monthly withdrawal from your bank account, you are well on your way to financial independence. Mirae Assets is one of the most popular asset management firms in Korea. They offer a range of products including equity funds, bond funds, and money market funds (or a mixture of these). You can also choose the region or country you would like to focus your investments in.
Although emerging market funds are currently more fashionable and offer the greatest potential upside, they are riskier than traditional markets. Diversification is essential for any type of fund investment, no matter where you are investing. Despite an English-friendly website, you may need some language support to get set up.
There are literally hundreds of funds that can be purchased through any of the major banks. If English service is not a priority, the sky is the limit. However, for English support, you may have to locate a global center or main branch (usually located in Euljiro or Jongno in downtown Seoul) where the staff are accustomed to dealing with foreigners.
There are a number of legal requirements to consider before getting started. For many banking products, an ARC is required. You may still purchase these products without an ARC (i.e. with a passport) but you won’t get the same rate. Some banks require you to have an account with them before you purchase funds while others have their own special requirements, so always ask before you start buying any products.
Despite the subtle differences between investment vehicles, you have to answer the following questions. How much money do you want to start with? Can you budget an automatic monthly withdrawal from your bank account? If so, how much can you live without? Are you long-term or short-term? Do you want your cash back in a year or can you leave it in for five years or more? Do you want something safe like a bond offering which could get you 5% per year, or are you willing to ride out the highs and lows of an individual stock, a fund or even the market itself?
Further Research on Investing in Korea
The sea of financial information available can be overwhelming, while the 2-3 page business section of local dailies is merely a glimpse into the markets. Each of the securities companies has their own research department and this information is available to clients, regardless of whether you make a single trade. There are a number of online information sources where investors can start. Here are a few:
Bloomberg.com and Reuters.com These two sites have comprehensive and up-to-date information on the global economy as well as Korea-specific financials and forecasts.
Investopedia.com is a great website for beginners who want to learn about stock trading and other types of investing.
The World News Network has dozens of links to Asian news, financial news and country specific sites, including Korea.
Samsung Economic Research Institute is a valuable economic research webpage is updated daily and is useful for those interested in the market. You can find Korean stock market news available on their website.
Yahoo Finance One of the best sites for charting Korean stocks. They have all stocks listed but may lack some of the information that would be available through local financial institutions.
Korean language skills or a local acquaintance can expose you to even more investment opportunities. Despite the initial looks of horror and panic, staff will usually do all they can to have you as a client.
English-Friendly Securities Companies in Korea
Once you’ve done your homework and have some ideas of how much you’re ready to invest, it’s time to pick up the phone (or fire up your browser). Get started with the list of foreigner-friendly investment securities companies in South Korea below.
Mirae Asset Securities (click on English) Call Alex Choi (02-568-4488, 010-3224-2302) for able assistance in English. The office is located near Yeoksam Stn. (line 2)