Companies Can Buy back Their Own Shares during Regular Trading Hours

Listed companies can buy their own shares during the regular trading hours as early as this week. The government planned to take measures to prevent the sudden change of the stock price. The measures include buying stocks through the Stock Market Stabilization Special Fund, established by bank, stock and insurance investors, if the stock price falls, and reducing the range of price restriction in the Korea Stock Exchange and the Kosdaq market.

The government announced yesterday that it drew up measures to stabilize the stock market at a financial policy consultative meeting presided over by Kim Jin-Pyo, the vice minister of Finance and Economy, at the Bank Hall in Myong-dong, Seoul.

The government previously allowed companies to sell and buy their own shares only during the bidding, which took place before the opening of the market, because they could manipulate the stock price if they could buy their own shares during the regular trading hours. However, the government decided to allow the companies to buy their shares during regular trading hours.

The government also decided to allow insurance companies and investment trust companies to expand the limit of stock investment of the affiliated companies to 3 percent of the total asset and 10 percent of the trust property.

When the stock market prospered in 1999, the government directed the insurance companies to limit the investment of the affiliated companies from 3 percent to 2 percent of the total asset. The investment trust companies also minimized the investment limit of the affiliated companies from 10 percent to 7 percent of the trust property. However, the government turned back to the measure, which was enforced before 1999. Originally, the measure was taken to prevent the `moral hazard`, which the institution investors expanded the shares of the affiliated companies by using the customers` money. However, the government removed the stumbling stock of the investment to stabilize the market this time.

The government plans to encourage the four pension funds to invest 2.2 trillion won, which was originally allotted for the stock investment, and to establish the investment pool of the small-amount pension fund by the early October to buttress the stock price.

If the stock continues to fall down despite these short-term measures, the government decided to establish the Stock Market Stabilization Special Fund, in which banks, stock and insurance companies that are responsible for the stabilization of the stock market participate together.

Yim Jong-Ryong, director of the stock system of the Ministry of Finance and Economy, said that ``the government will establish the amount of the special fund that is enough to promote the stabilization of supply and demand. Although the reduction of the price restriction range was already prepared by the Korea Stock Exchange and the Kosdaq, the government will resolutely carry out by monitoring the market situation.``

yhchoi65@donga.com