Korea Securities Depository has signed a memorandum of agreement with Euroclear Bank to provide international investors with better post-trade access to Korea treasury bonds and monetary stabilization bonds.
The collaboration will seek to “create appropriate local market conditions to support a Euroclearable, cross-border link”, according to the MOU. Brussels-based Euroclear provides settlement and custody of domestic and cross-border securities such as bonds, equities and derivatives, and investment funds.
The move comes after Korea’s finance ministry revealed plans to exempt foreign investors from interest income and capital gains taxes on their investments in government bonds, as part of efforts to stabilize the local currency amid a volatile foreign exchange market.
Korea is also keen on being included in FTSE Russell’s World Government Bond Index (WGBI), where it is now on the watchlist, to further attract foreign investment into its capital markets.
With the signing of the MOU, Euroclear and Korea Securities Depository (KSD) “will be able to achieve a higher level of relationship and build a robust partnership”, says KSD chairman and chief executive officer Myongho Rhee.
Euroclear Bank CEO Peter Sneyers adds: “Korea’s capital markets have made great strides recently to encourage foreign investment, most notably the implementation of the new Tax Revision Bill for non-residents and foreign corporations, which signifies a true commitment towards opening a cross-border link. As a financial market infrastructure, we will continue to support and work closely with the market in its journey to include Korea treasury bonds into the [WGBI].”