`ETF` Be Introduced Next Year

The government decided to allow the `Exchange-Traded Funds (ETFs)` in the beginning of next year. The ETFs are the new financial commodity whose profitability is determined by the fluctuation of the stock price index.

The government will pursue to issue the `Collateralized Loan Obligations` (CLO) and ease the limitations on the stock sales. And it will soon announce the measures for the taxational and financial support such as loans for the corporate`s purchasing funds, in order to revitalize the settlement system of the transaction cost between companies.

Jin Nyum, the Deputy Prime Minister and the Minister of Finance and Economy, revealed yesterday the economic policy line of next year in the regular academic forum of the Korea Money and Finance Association as well as in the meeting with the entrepreneurs of the small and medium venture companies.

Deputy Prime Minister Jin told that the government will establish the concrete plan to introduce the ETFs and will adopt this system early next year by revising the investment and trust law.

``The government will change the current `positive system` that enumerates only the affordable financial commodities, to the `negative system` that indicates the non-affordable ones and allows all the rest, which in turn will help develop the financial commodities as much as possible,`` said Jin. ``The government will review the effect of the deregulation in the financial sector during the second half of this year, and will try to resolve the possible problems.``

And Jin declared to establish the various measures to help the small and medium venture companies raise the funds. The measures are the following; the establishment of the measures for the taxation and financial support in order to revitalize the settlement system of the transaction cost, such as the exclusive card for the corporate`s purchasing which will replace a promissory note between companies, the issue of the CLO that Korea Technology Credit Guarantee Fund guarantees, the alleviation of the limitations on the stock sales to the venture capital. For the easing of the limitations on the stock sales, presently, the venture capitals have been prohibited to sell the stocks of the venture companies in the market during 3-6 months after registration in the KOSDAQ. But this limitation will be eliminated or the period to prohibit the sales of stocks will be shortened in the future.

Deputy Prime Minister Jin added that ``a consulting company, McKinsey Inc. recently insisted that the additional public funds need to be raised. But its opinion derived from the overestimation of the scale of Korea`s insolvent bonds. We need to raise no more public funds as of now``.

ETFs : a kind of index fund, which can be raised according to the ratio of the total market price amount of stock price index item, and can be listed in the stock market. The investors can sell the stock to the market at any time and the amount of the stock to be sold would not be a burden to the stock market. It would be a pump-priming effect on the stock market because the ETFs can reduce the loss due to the difference of timing between the application of sales and the actual sales.

Park Joong-Hyun sanjuck@donga.com