Will 246 Trillion Won in Overseas Capital Return? Supply and Demand Improvement Expected with RIA Adoption

As the introduction of Returned Investment Accounts (RIAs) becomes a reality, expectations for improved supply and demand are growing in the securities industry.
However, with variables such as legislative delays and external uncertainties intertwined, cautious views regarding the policy's effectiveness are also emerging. According to the financial investment industry on the 19th, the launch of accounts within the first quarter has become uncertain after the 'Exchange Rate Stabilization Act' (amendment to the Restriction of Special Taxation Act), which includes the introduction of special tax treatment for RIAs, failed to be submitted to the National Assembly plenary session. Securities firms had initially prepared for a launch targeting the 23rd, but with the next plenary session scheduled for the 31st, the actual launch is expected to be pushed back to April. The RIA is a system that provides a reduction in capital gains tax if funds from the sale of overseas stocks are invested in domestic stocks for at least one year. Benefits apply as follows: 100% exemption for sales made by the end of May, 80% for sales made by the end of July, and 50% for sales made by the end of the year.
Currently, the scale of overseas investment by domestic investors is substantial. As of the 17th, the value of U. S. 1 billion (approximately 246 trillion won).
However, some signs of a shift in trends have recently emerged. Net purchases of U. S. 9 billion).
Some interpret this as policy expectations being partially priced in. 64 million by the end of the month immediately following the government's announcement of tax incentive measures on December 24 of last year. Consequently, market interest is growing regarding whether the introduction of RIAs will lead to actual capital movements. The securities industry assesses that RIAs could have a positive impact on supplying liquidity to the domestic stock market and improving supply and demand.
In particular, analysts suggest that the imposition of a holding period of at least one year could shift individual funds from short-term trading to medium-to-long-term investment, thereby enhancing supply and demand stability by effectively locking up these funds in the domestic market. However, the continued strong preference for dollar assets amidst ongoing external uncertainties, such as Middle East risks, is cited as a variable. Lim Jeong-eun, a researcher at KB Securities, explained, "The preference for safe assets, which remains robust due to external risks such as the prolonged war between the U. S.
and Iran, could be a variable that constrains the capital recirculation effect of the RIA. " She added, "The prevailing market sentiment is that demand for U. S. stocks, which are considered relative safe assets, is unlikely to weaken in the short term.
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koreanbae@fnnews.com Bae Hangeul Reporter