Public growth fund sells out on debut

A government-backed investment fund designed to channel household savings into South Korea’s advanced strategic industries sold out on its first day, as investors rushed to secure a stake in a product offering government-backed loss protection and substantial tax breaks.

The entire 220 billion won tranche allocated to the country’s five major lenders, including KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH NongHyup Bank, was fully subscribed Friday, according to industry officials.

Demand was just as strong at brokerages. Online subscriptions offered by Mirae Asset Securities, Korea Investment & Securities, KB Securities and Daishin Securities closed within minutes, with some firms exhausting their allotments in less than 10 minutes after sales opened.

Although subscriptions remained available through branch offices, quotas were being filled rapidly as investors continued to stream into banks and brokerage branches throughout the day.

“Customers began arriving as soon as subscriptions opened at 8 a.m., filling both the counters and waiting areas,” said Jeong A-ran, head of KB Securities’ Daechi Financial Center. “The available allotment disappeared quickly, and many people who waited all morning ultimately went home empty-handed.”

The public participation growth fund is part of the government’s broader National Growth Fund program, which aims to channel 150 trillion won into South Korea’s advanced strategic industries over the next five years. The fund was created to allow individual investors to participate directly in the initiative.

A total of 3 trillion won will be raised over five years through annual offerings of 600 billion won. To cushion investor risk, the government will contribute 120 billion won each year and absorb losses first, covering up to 20% of any losses incurred by the fund.

The product also comes with tax incentives, including income tax deductions of up to 18 million won and preferential tax treatment for dividend income.

Lee Eok-won, chairman of the Financial Services Commission, visited an NH NongHyup Bank branch at the Government Complex Seoul on Friday and personally subscribed to the fund, investing 10 million won.

“The public participation growth fund gives ordinary citizens an opportunity to share in the growth of future strategic industries,” Lee said. “For companies in those sectors, it will help ensure a steady flow of capital needed to support expansion and innovation.”


강우석 wskang@donga.com