Foreign Portfolio Investment Procedures

Qualified Investors

• Foreign Investors Allowed to Register - Individuals of foreign nationality
  • Companies incorporated under foreign law - Korean citizens with permanent foreign residency
  • International financial organizations or associations established by treaties
  • Governments, municipal governments and public entities of foreign countries - Funds or unions established, regulated and controlled by foreign laws, etc.
• Resident Foreigners Exempted from Registration
  • Individuals working at business offices or performing business activities in Korea
  • Corporations having their main offices in Korea, or branches or offices of foreign corporations

Available Instruments

• All shares listed on the Korean Securities Exchange (KSE) and traded on the KOSDAQ market
• All listed bonds including corporate bonds and government bonds
• Stock price index futures and options contracts traded on the KSE
• Equity-type and bond-type beneficiary certificates
• Certificates of rights offering
• Short-term money market instruments such as CP, corporate bills and notes, etc.

Investment Procedure

• Investment Registration

  Foreign investors who want to invest in the Korean securities market are required to register under their real names with the Financial Supervisory Service (FSS) to receive investment registration certificates. Application can be made either directly or through a standing proxy. Resident foreigners are exempted from the registration requirement.

• Designation of Standing Proxy

  Although foreigners are not required by law to designate a standing proxy, it is recommended that non-resident foreigners have a standing proxy to ensure that their investment-related activities are carried out in a timely manner. Securities companies, banks and the Korean Securities Depository are eligible to serve as standing proxies for foreign investors. The major services of standing proxies are investment registration, account opening, order placing, settlement, collection of dividends or interest, etc.

• Account Opening and Order Placement

  To invest in the Korean securities market, a foreigner is required to open an account for stock trading or bond trading. Orders can then be placed by telephone, telex, facsimile, personal computer or in a written form.

• Collection of Good Faith Deposit

  When a KSE member receives an order from a customer, including a foreign customer, the member collects a good faith deposit from the customer at the time of order receipt.

• Trading by Foreigners in the OTC Market

  In principle, foreigners can trade stocks only in the KSE market. In the following cases, however, trading can also be done in the OTC market:

  1. ⅰ) trading of odd-lot orders
  2. ⅱ) acquisition of shares converted from overseas securities
  3. ⅲ) acquisition by inheritance, donation or bequest
  4. ⅳ) acquisition by the exercise of shareholders' rights
  5. ⅴ) direct trading among foreigners of shares in excess of the foreigners' investment ceilings