Capital Market Reform and the Challenges Facing the New Government in Korea

Abstract

Korea's capital market reforms gathered momentum when the IMF program it adopted following the Asian Currency Crisis came to an end in 2001. The reforms (e.g., the establishment of Korea Exchange through the integration of the country's three existing exchanges, measures to promote the exchange-traded derivative market, and the enactment of the Financial Investment Services and Capital Markets Act) have had a certain degree of success, leading, for example, to the expansion of Korea's capital markets and greater participation by overseas investors. Nevertheless, some critics say that Korea's capital markets lack dynamism as a result, for example, of an absence of competition among the exchanges and an excessive degree of concentration in the chaebol. There has also been some concern about the country's rapidly aging population, the strength of the currency, falling property prices, and a perceived decline in the ability of the country's banks and companies to weather hard times. It will therefore be interesting to see how the new government tries to restructure the economy and revitalize its markets.

Keywords: Korean Capital Market, Korean Securities Market, Korean Financial Services, Financial Investment Services and Capital Markets Act

JEL Classification: G24