KOREAN INVESTORS WITHDREW THEIR RIA ACCOUNT FROM THE LOCAL MARKET AND RELEASED 500 BILLION WON IN TWO MONTHS. DOLLAR

On 6 August, an increasing number of Korean diaspora investors, according to the Korean media, are re-routing to the United States stock market, even at the expense of tax incentives and taxes. The Korean Government had previously launched the Returning Investment Account (RIA, Returning Investment Account), which was designed to attract overseas equity investment funds back to the domestic market, but only four months after the introduction of the system, there had been outflows. According to data published by the Korea Financial Investment Association on the 6th day of last month, the total balance of the RIA account stood at 212.14 trillion won at the end of May, which exceeded 2.6 trillion won at the end of May and decreased by about 500 billion won within two months. This was the first net monthly outflow of account balances since the introduction of the system on 23 March. The RIA system provides that an investor who sells an offshore stock and reinvests its funds in a South Korean listed stock or stock-type fund receives tax relief on the overseas equity capital. However, to benefit from tax incentives, investors must hold investment funds for at least one year. Data show that in July the Korean KOSPI index fell by more than 20 per cent, while the NASDAQ index fell by only about 2 per cent over the same period. The analysis found that, because investors were afraid of being locked in the Korean market to save capital gains, they might face the risk of shrinking assets, and therefore, even if tax incentives were to be waived and tax penalties imposed, some investors chose to cancel the RIA account。