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Investing in Korean Stocks

© Athan Rodostianos

Many people I have come across ask me how I manage my money here in Korea. I have never been one for giving it to the banks, I would rather buy the bank, and so I pass on this small piece of information to those interested.

For anyone legally living and working in Korea investing in the local stock market (the KSE and KOSDAQ) is a relatively simple process.

Unlike non-resident foreigners who have to register with the Financial Supervisory Service prior to commencing trading, a resident-foreigner merely has to open an account with a securities firm and a local bank.

For this purpose a resident-foreigner is defined as someone who holds an alien card and has been living in Korea for at least six months or someone who has a legal work contract and has been living here for at least two months.

After having located a broker (see the Korea Stock Exchange website at http://www.kse.or.kr and the Korea Securities Dealers Association website at http://www.ksda.or.kr ), a prospective investor needs to take a passport and an alien card or a passport and a work contract to the broker of choice.

Once an account has been opened the broker will require the placement of a "Good Faith Deposit", a sum of money (or substitute securities) which is held in trust prior to the trade of securities. The value of the deposit varies somewhat from broker to broker but somewhere around 50% of the intended trade figure is a ball park estimate for trading.

Orders may then be placed through the broker via telephone, fax, email, or letter. An order will require the following information - Whether buying or selling, the account number, secret code numbers (if any), the names of issues to be traded, the numbers of shares and order prices.

Settlement of order transactions must take place by the second business day following the trade and can be done via direct bank transfer. Failure to do this will incur an overdue penalty rate (which is currently set at 17% per annum).

Brokerage rates are freely determined by the securities firms but the charge is normally between 0.4% and 0.5% of the transaction amount. An additional 0.3% Securities Transaction Tax must also be paid.

For taxation liability on dividends and capital gains and losses, resident-foreigners are treated the same as Korean nationals. More information can be obtained from a broker or other financial expert.

An investment in the Korean stock market may prove very worthwhile.