Seo Yuseok Chairman "High Interest Rates Won't Last Forever... Efforts to Restore Capital Markets" (Comprehensive)

Chairman Seo Yu-seok is speaking at the New Year's meeting of the press corps held on the 17th in Yeouido, Seoul.
[Photo by Korea Financial Investment Association]

[Asia Economy Reporter So-yeon Park] Seo Yu-seok, Chairman of the Korea Financial Investment Association, stated, "The money move into deposits cannot continue indefinitely," and expressed confidence that "2023 will be a year where crisis and opportunity coexist from the perspectives of the economy and investment." He then announced four key tasks to revive the stagnant capital market.

At the New Year's meeting with the press corps held on the 17th in Yeouido, Seoul, Chairman Seo said, "Last year, the KOSPI fell more than 20% from the beginning of the year (2988), making it the biggest decline among the G20 countries except for Russia, which is at war," adding, "While it is difficult to predict short-term market conditions, this also means that mid- to long-term opportunities are opening up."

Chairman Seo forecasted, "It is difficult for high interest rates to be maintained forever," and "interest rates will come down, and phenomena of wealth accumulation through the capital market will reappear."

Regarding concerns over liquidity crises in construction companies, savings banks, mutual finance, and capital companies due to the downturn in the real estate market, he emphasized, "There is strong government will from the Deputy Prime Minister to the Financial Services Commission," indicating that the government and authorities are striving for a soft landing of the real estate market.

Chairman Seo identified the four key tasks for the Korea Financial Investment Association this year as ▲ overcoming liquidity crises ▲ advancing national asset management ▲ easing regulations related to the financial investment industry ▲ and protecting investors.

Seo Yu-seok mentioned, "Due to the prolonged global pandemic and the Ukraine war, inflation, rapid interest rate hikes, and resulting credit crunches, both domestic and international capital markets and real estate markets, as well as the real economy, are experiencing stagnation."

He expressed concern, saying, "There are multiple challenges such as the contraction of the private equity fund market, declining investor trust, continuous stagnation of public funds, sharp drops in stock trading volumes, and real estate project financing (PF) issues in securities companies."

He noted that recently, market conditions have shown signs of slight stabilization. Chairman Seo said, "As a result of efforts by government authorities including the Financial Services Commission to overcome the crisis, short-term funding markets such as corporate bonds and commercial paper (CP) interest rates have recently stabilized."

The 91-day CP interest rate adjusted from 5.54% at the end of last year to 4.86% as of the 16th of this month. The 3-year corporate bond (AA-) rate also declined from 5.662% to 4.661% during the same period.

He also previewed active policy proposals for advancing asset management. Seo Yu-seok said, "As of the end of 2021, the number of stock investors was 13.84 million, increasing annually from 5.05 million in 2017," emphasizing that "the capital market greatly influences the lives and household economy of the people."

Chairman Seo stressed that market activation policies such as tax support for long-term stock and bond investments and tax-exempt long-term investment funds are urgently needed, and he plans to actively propose these to the government.

He also forecasted the revival of the stagnant public fund market.

He promised, "We will promote the introduction of tax-exempt long-term investment funds and policies to revitalize public funds, and support asset management companies in launching new products such as foreign currency-denominated money market funds (MMFs) and performance-linked management fee funds."

He mentioned plans to improve the system to enhance the international consistency of domestic ETF regulations in line with the rapid growth of the ETF market.

He also declared that private equity funds will lead capital market innovation again.

Seo Yu-seok said, "We will strengthen the custody infrastructure, including expanding direct custody by prime brokers, and thoroughly review the entire private equity fund regulatory system to improve elements that hinder industrial development and devise sustainable development plans."

Regarding high-quality private equity funds investing in areas difficult for the general public to access, such as social overhead capital and real economy investments, the plan is to expand investment opportunities for general investors through fund-of-funds.

He also emphasized, "This year can be the first year of the 'Great Money Move' into the private pension market."

He stressed the urgency of "activating private pensions," which complement public pensions, and said he would support improving private pension returns so that private pensions can share part of the national retirement income burden.

Regarding the 'financial investment income tax,' a dedicated task force (TF) will be formed for thorough review. Chairman Seo said, "We will also seek a reasonable solution for the taxation of dividend income from private equity funds in terms of tax rationalization."

On easing regulations related to the financial investment industry, he said, "We will review regulations overall, including those on complex products, leveraged ETFs, and financial product risk rating systems," adding, "If there are unreasonable parts that do not fit the currently stagnant capital market, we will actively propose regulatory easing to the government."

He plans to prepare specific institutional improvement measures for advancing the initial public offering (IPO) market, such as allowing pre-demand surveys for institutional investors, in cooperation with the industry. Regarding investor protection, he said they will support strengthening internal controls of member companies and implement more efficient and practical self-regulation.

Meanwhile, the Korea Financial Investment Association plans to host the annual meeting of the International Council of Securities Associations (ICSA) in Seoul from June 18 to 20 this year.

This content was produced with the assistance of AI translation services.