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S.Korea to allow foreign investors to use omnibus accounts

[SEOUL] South Korea said on Sunday it plans to introduce next year the omnibus account system that it hopes will help save the cost while enhancing convenience for foreign investors in the local stock markets.

The government also hopes the move will help the country's stocks be reclassified into the developed market category by index compiler MSCI from the current emerging market status, a goal the country has been pursuing for a long time.

An asset management company will be able to conduct transactions of South Korean stocks through one omnibus account on behalf of multiple foreign investors, compared to the current system requiring each investor to open an account. "Index-tracking passive funds are taking an increasing share of the local stock market and they are sensitive to transaction costs," Kim Hak-soo, head of the capital markets bureau at the Financial Services Commission, told an embargoed briefing.

South Korean officials have said reclassification of South Korea into the developed market group by the MSCI would help the country's financial markets avoid unnecessary turmoil at times of increased volatility mainly involving emerging markets.

The country's economy is estimated to be the world's 11th largest in 2015 with annual gross domestic product of $1.4 trillion, and is already classified as an advanced economy by many organisations including the International Monetary Fund.

The commission said it would conduct a test run for the omnibus account system from May before formally introducing it from the beginning of 2017.

Along with the omnibus account system, South Korean officials have said foreign investors also demanded a higher convertibility of the country's won currency, which currently trades within the country.

Kim at the commission said South Korean authorities were looking into various options aimed at making the currency more freely convertible, while declining to elaborate.