Gov¡¯t announces stock market stabilization package

As part of its efforts to prop up the depressed stock market, the government has decided to expand its support for companies purchasing their own stocks through such means as tax incentives.

The government will also induce insurance companies to make more active investments in the stock market. In order to reinvigorate the indirect financing market, which is also in a slump under the influence of the languid bourse, it also decided to allow asset management companies to introduce open-ended mutual funds.

The government yesterday held an emergency meeting of economy-related ministers presided over by Finance and Economy Minister Jin Nyum and arranged the package of measures to boost the stock market. Participants in the meeting included the Minister of Commerce, Industry and Energy and Minister of Planning and Budget, as well as the chairman of the Financial Supervisory Commission, the governor of the Bank of Korea and the chief presidential economic secretary.

Minister Jin analyzed that at present, the domestic stock market is affected by excessive psychological uneasiness. "The government will closely watch the market situation and take all measures available to boost the market in addition to those unveiled today," he said.

To begin with, the government will give tax incentives to listed companies that buy back their own stocks to support the stock prices. The government will revise a related tax law and put the measure into force immediately for this purpose. Companies will also be allowed to set aside 30 percent of the acquisition costs of stock buybacks in loss reserves, which are exempted from corporate taxes.

In addition, the government expanded the scope of corporate funds that can be mobilized for stock buybacks to include the profits possible for dividends under the commercial law, and also simplified the procedures for companies to buy back their shares with operating profits and retire them.