(LEAD) S. Korea’s sovereign wealth fund may invest in local financial markets

Written by Meenaa on Wednesday, November 19th, 2008

SEOUL, Nov. 19 (Yonhap) — South Korea said Wednesday that it plans to allow its sovereign wealth fund to invest in domestic financial markets amid growing demand for measures to bolster the nation’s plummeting stock markets.

The Finance Ministry said that it will submit a law revision under which Korea Investment Corp. (KIC) would be allowed to buy local stocks, bonds and properties. The ministry aims to pass the revision through parliament “as soon as possible.”

Established in 2005 with the nation’s foreign reserves, the KIC is currently managing around US$24.8 billion worth of assets, with its accumulative profit rate estimated at 7.69 percent until the first half of this year, according to government sources.

Under the revision, the sovereign wealth fund will also be allowed to issue or borrow 30 times as much as its capital value and the government will guarantee the borrowing, the ministry said.

The move comes as the local stock markets have plunged 45 percent so far this year amid growing jitters that the ongoing global financial turbulence might drag the economy into a worldwide recession.

The ministry said the revision is intended to provide more leeway for the fund to operate its assets as other global rivals in China and Singapore do not have such a “restriction,” adding the move “has nothing to do with” boosting the local stock markets.

kokobj@yna.co.kr