South Korea liberalizes capital controls

South Korea is taking steps to liberalize its capital controls, with the purpose of spurring outbound foreign investment. South Korea has amassed over $200 Billion in foreign exchange reserves, while trying (in vain) to prevent the Won from appreciating against the dollar. Rather than continue its futile intervention in forex markets, South Korea has wisely decided to allow for greater outflows of capital. This policy will serve the dual purpose of lowering South Korea's forex reserves, as South Koreans exchange Won for foreign currency, and should also check the Won's broad appreciation. The specifics of the policy have yet to be worked out. Previously, South Koreans were limited in the amount and type of investments they could undertake abroad. Now, however, South Koreans will be permitted to invest in real estate properties abroad, even if only for investment purposes, and not for their utility. The Korea Times reports:

Local investors will be allowed to purchase overseas properties through real estate investment trust funds managed by the asset management firms. The government is also studying ways to relax rules requiring the domestic institutional investors to obtain prior approval from the regulators for the trading of financial derivatives products in overseas markets.

Read More: South Korea to Stimulate Outbound Investment