The finance minister of South Korea said the nation will consider allowing hedge funds to operate in the country in an attempt to advance the economy amid competition from foreign manufacturers, according to Agence France Presse.
Kwon O-Kyu stated at a conference that the government is increasing efforts to revitalize the asset management industry through diversified sales channels for funds and deregulation.
“Once a solid foundation is laid for asset management after the Capital Markets Consolidation Act takes effect, we will consider plans for allowing hedge funds,” he said at a conference in Seoul. A related bill would be sent to parliament for approval next month, he said.
“Some point to the side effects of hedge funds, such as increasing financial market uncertainties by pursuing excessive short-term profits and herding to take advantage of fragile, underdeveloped markets,” Kwon said.
“Nevertheless, hedge funds can also be used to provide new investment opportunities to investors and to promote the development of financial techniques, thereby upgrading Korea’s financial markets to the next level.”
Manufacturing has faced a lot of competition from advanced nations and China, while other “low emerging economies” are quickly catching up, he said.
“In order to make such an economic paradigm shift possible, fundamental changes are necessary to the financial system that facilitate the flow of capital in the economy,” he said.
About 77 % of household assets remain concentrated in the real estate sector, while investment in stocks and bond is still low, he said.
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