Korea raises money from pensions for market stabilization fund

The Korean government is hoping to raise at least W1.5 trillion ($1.33 billion) for the introduction of a stock market stabilization fund by the end of this month, said a finance ministry official following a ministerial meeting on Saturday.

The fund will raise money from the domestic pensions industry, which, a government official says, has exhibited a "high level of interest" in the market rescue operation. The official, Jong-yong Lim, added: "We are expecting demand to exceed the fund's W1.5 trillion mark very soon, which would require expanding the size of the fund."

The government says asset management companies and investment trust companies will manage the fund but will not be held responsible for any investment losses.

The move to attract long-term investors to the country's languid stock market has come after the government's announcement last week that it is preparing to lift restrictions on pension funds buying stocks.

Currently only three out of the country's 73 pension funds are allowed to invest directly in the stock market, with a ceiling of 10% in any individual stock. Min-soo Kyung, Deutsche Bank's head of securities in Korea, puts the size of pensions money invested in stocks at around W7 trillion out of a total fund pool of approximately W170 trillion.

Lim says the government will approach public and private pensions funds to raise money.