Despite inflows, RIAs account for just 0.38% of overseas holdings
South Korea’s record-setting Kospi rally is driving a surge in reshoring investment accounts, or RIAs, with balances topping 1 trillion won ($675 million) as retail funds begin to flow back from overseas markets.
According to the Korea Financial Investment Association on Thursday, RIA balances had reached 1.05 trillion won as of Wednesday, with the number of accounts rising to 160,000.
The scheme is designed to encourage retail investors to repatriate funds from overseas stock markets by offering tax incentives on foreign investment gains, provided the proceeds are reinvested domestically. Without the program, such gains are subject to a fixed capital gains tax rate of 22 percent.
Investors who return funds by May 31 are eligible for a full tax exemption, which reduces to 80 percent by the end of July and 50 percent by year-end. The benefit is capped at 50 million won per person.
Inflows have accelerated in recent weeks. Retail investors posted net sales of 2.7 trillion won in US equities this month, marking the first monthly net selling since June last year.
Net purchases of US stocks by Korean retail investors have also slowed sharply, falling from about $5 billion in January to $3.9 billion in February and $1.7 billion in March.
The shift reflects both policy incentives and changing market dynamics. While the S&P 500 has struggled after breaking above 7,000 points in late January, the Kospi has continued to rally, climbing from around 4,200 at the end of last year to above 6,400 this week. As of 2:30 p.m. Thursday, the Kospi was trading at 6,343.18, up 0.25 percent from the previous session’s close.
A strong dollar — with the won hovering near 1,500 per dollar amid geopolitical tensions including the Iran conflict — has also encouraged profit-taking in overseas assets.
Despite the recent inflows, Korean retail investors still hold US stocks worth $176.3 billion as of April 20, meaning RIA balances account for just 0.38 percent of total holdings.
ch0221@heraldcorp.com
