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Home > mk Business News 프린트 이메일 전송 리스트
Super-rich Koreans flock to Korea Paper
2013.05.22 15:18:01 | 2013.05.22 17:02:57
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South Korea’s super-rich investors are flocking to “Korea Paper (KP).” KPs refer to foreign currency-denominated bonds issued overseas by Korean companies for financing.

[Super-rich Koreans flock to Korea Paper] 기사의 본문 이미지

Of note, KPs are taking center stage as a safer bet on the home soil as the yield on time deposit has dropped to the mid two percent range. They are attracting the affluent as they are tax-free and subject to separate taxation, while offering potential additional return depending on foreign exchange (FX) rate fluctuations.

Domestic privately-placed KP funds saw net inflows of over 60.0 billion won ($53.95 million), reaching 487.4 billion won last month versus 426.8 billion won in January this year, and surged to 522.5 billion won as of May 20, said local fund evaluator KG Zeroin last Tuesday. This suggests around 100 billion won has poured into KPs in five months.

KPs have become a popular place of investment as the top rich are searching for a safe haven as domestic time deposit yield dwindles to a two percent range. KPs are luring the wealthiest Koreans with higher interest rates, tax exemptions and potential extra gain on FX fluctuations.

Generally, bonds issued overseas offer higher interest rates than those issued domestically. US dollar-denominated bonds issued by Shinhan Bank with a maturity date set in 2016 have an annual coupon rate of 4.125 percent, over 1 percentage point higher than the level of domestically issued ones.

An investment in dollar-denominated KPs may reap an additional 1.0 to 1.6 percent gain from short currency forward positions (won-US dollar) to hedge FX risk.

[Written by Hwang Ji-hye]

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