Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Individuals can invest in government bonds with 100,000 won from next year
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By Lee Yeon-woo
By Lee Yeon-woo
Starting in the first half of next year, retail investors will be able to invest in government bonds with a small amount of money.
According to the finance ministry, Monday, the government has released a preliminary announcement regarding revisions to the State Bond Act, and is coordinating with relevant sectors to introduce a government bond specifically for retail investors. The projected minimum investment amount is set at 100,000 won ($75.56), with an annual maximum investment cap of 100 million won.
While retail investors have previously been permitted to invest in government bonds through securities firms, this was often viewed as unfavorable. The market primarily caters to institutional investors, where investment amounts can quite often easily surpass 100 million won.
As of 2021, the percentage of government bonds held by individuals in Korea is less than 0.1 percent. This figure is notably low compared to countries like the United Kingdom at 9.1 percent, Singapore at 2.6 percent, and Japan at 1.0 percent.
Since March, the government has implemented measures to simplify the process for individuals wishing to invest in these bonds in order to address this issue.
The anticipated product is likely to have a maturity term of 10 or 20 years. Unlike stocks or bonds, these, however, cannot be traded on the market. If investors retain them until maturity, the government will provide additional interest and tax reductions to encourage long-term investments. Selling the bonds before their maturity is possible, but will result in the loss of these benefits.