Investing in South Korea

Investing in South Korea can be a rewarding experience with its strong fundamentals and proactive government policies. Investors with different budgets can find opportunities, from luxury properties in popular districts to affordable options in emerging areas. However, before making a purchase, investors should take into account the taxes and fees associated with the property they are buying, which can vary depending on where the property is located.

The Korean economy is dominated by a handful of family-run conglomerates known as chaebols, which have outsize wealth and influence in the country. These companies, which control more than half of the nation’s top 500 listed firms, operate in a variety of sectors, including electronics, automotive, insurance, retail and food. However, these companies are not immune to global competition, and their monopolistic control over their industries makes them susceptible to the effects of rising labor costs, increased regulation and rising interest rates.

Foreign investment in Korea is subject to some restrictions, but the government has worked to ease FDI barriers and bring its rules in line with international standards. The government also proactively promotes FDI and participates in overseas events to recruit investors. It is important for foreign investors to stay up-to-date on the latest government initiatives and changes.

To trade in the Korean stock market, foreign investors must register with a local securities company. The registration process can be lengthy, and it is important to get a registered representative who can handle the registration and filing of documents on behalf of the investor. Foreign investors also need to appoint a custodian bank which can offer custody, money transfer and security settlement services.

In addition to registering with a local securities company, foreign investors must register their assets with the government’s Foreign Investment Promotion Agency (FIPA) to receive tax benefits. In general, FIPA approval is required for a foreign investor to acquire a stake of 10 percent or higher in any Korean company. Exceptions may be made for national security or defense-related reasons, or if the company’s operations would pose a risk to the economy or the country’s infrastructure.

With its low birthrate, aging demographics and strained pension system, Korea has a pressing need to attract more foreign investment. Closing the “Korea Discount” could allow companies to be more accurately valued based on their performance and financial standing, which in turn unlocks value for shareholders.