South Korea yesterday gave details of its plans to transform the country into a regional financial hub, offering incentives to form large investment banks and to boost investment funds.
The Ministry of Finance and Economy made the "road map" public after holding a second financial hub meeting, presided over by South Korean President Roh Moo-hyun.
It is considering offering tax incentives to stimulate mergers and acquisitions among financial companies and the formation of large-scale investment banks, Yonhap news agency reported.
The government also plans gradually to ease other regulations on private equity funds. It aims to eliminate many of the regulations by 2010 and to approve the setting-up of hedge funds in South Korea by 2012.
Regulations on private equity funds' investment in overseas assets via offshore special purpose companies will be scrapped by the end of this year, under the plan.
Financial companies will be encouraged to enter foreign markets as part of a globalization drive, the ministry said. Procedures for setting up overseas branches will be streamlined.
The government also plans to diversify investments by the state-run Korea Investment Corp into private equity funds, hedge funds, real estate and other areas, and to boost its assets to US$200 billion by 2015.
Early this month parliament passed the Capital Market Consolidation Act, hailed as Korea's "Big Bang," which lifts barriers between different financial sectors in Asia's third largest economy.
The government has outlined plans to transform and open up its economy to meet the threat posed by a low birthrate and aging population, as well as by growing competition from lower-wage Chinese manufacturers.
The Northeast Asian Financial Hub Initiative is a key part of this.
Meanwhile, US private equity company Lone Star Funds isn't involved in any serious talks on the sale of its remaining majority stake in Korea Exchange Bank, its chairman said yesterday, a day after a British newspaper said HSBC had contacted the group about buying the holding.
"It's no secret that Lone Star and KEB both are interested in finding a new strategic investor [for the latter]," chairman John Grayken said in a statement. "We've talked with several potential investors in the last two years. At present, there's no in-depth discussion."
Lone Star issued the statement after the UK's Daily Telegraph reported that HSBC Holdings PLC is interested in taking a controlling stake in the Korean bank and has contacted Lone Star.
Korea Exchange Bank shares rose 4.4 percent yesterday to 14,400 won (US$15.70).
Last month, Lone Star sold a 13.6 percent stake in the bank in block sales to institutions. The company said it was holding its remaining 51.02 percent stake for sale to a strategic investor.
Legal cases surrounding Lone Star's purchase of Korea Exchange Bank in 2003 have deterred buyers. A Seoul court is investigating whether Lone Star manipulated the stock price of KEB's credit card unit.