KOFIA: Innovative and Creative

Launched in 2009 to enhance operation of the securities market and protect investors

Korea Financial Investment Association (KOFIA) was launched on Feb. 4, 2009, through the merger of the three associations representing the securities, asset management and futures industry, as set forth by the Financial Investment Services and Capital Markets Act (FSCMA), which took effect the same day.
The previous three associations ― the Korea Securities Dealers Association (established in 1953), the Asset Management Association and the Korea Futures Association (both established in 1996) ― played an essential role in building the framework of Korea’s capital market and financial investment industry. Furthermore, they played a pivotal role in making Korea’s capital market a world-class market by expanding the demand base in the securities market, building a healthy investment culture, establishing orderly trading practices and nurturing financial experts.
Due to such efforts, the Korean capital market was able to join the ranks of the top international markets, and is making great strides in enhancing its quality by encouraging long-term investments and a more sophisticated stock market. As a result, the Korean stock market was upgraded to ‘developed market’ status by the Financial Times Stock Exchange in 2008.
Enacted in 2007 and taking effect in 2009, the FSCMA introduces several deregulatory measures designed to further enhance and strengthen the Korean capital market and financial investment industry.
Through this, it is expected that the Korean capital market will continue to play a significant role in encouraging corporate finance and will firmly establish itself as a stable means of wealth management for Korean investors as Korea enters into an aging society. By performing such functions, KOFIA hopes Korea’s capital market will become a world-class financial market, and its financial industry will grow into a strategically important industry, as was the case for Korea’s manufacturing industry.
KOFIA promises to play a leading role in the advancement of Korea’s capital market and financial investment industry. The association said it will not only strive to enhance the competitiveness of the financial investment industry and protect investors, but also exert its utmost efforts to become a self-regulatory organization (SRO) trusted by the market and investors. To this end, they added, KOFIA will break away from the conventional practices and renew itself as a creative and innovative SRO.
KOFIA’s total net assets decreased in May 2010 with a drop in mark-to-market value following a fall in stock prices.
Total inflow and outflow totaled 58.2 trillion won and 54.2 trillion won respectively, reflecting a net inflow of 4 trillion won. However, the decrease (6.5 trillion won) caused by falling stock prices pushed the total net assets down to 322.5 trillion won, a 2.4 trillion won drop when compared to the previous month.
By fund type, equity funds posted a net inflow of 1.5 trillion won. However, as stock prices fell, total net assets of equity funds also dropped by 4.8 trillion won compared to the previous month, resulting in a decrease in net assets to 101.4 trillion won ― a 3.3 trillion won drop from the previous month.
Meanwhile, bond funds showed a marginal increase in net inflow (240 billion won), recording 51.4 trillion won in total net assets ― a 0.2 trillion won increase from the previous month.
Total net assets of money market funds (MMFs) also showed an increase of 1.9 trillion won to reach 83.5 trillion won owing to the increase in corporate MMFs.
In terms of the composition of assets owned by all funds, stocks accounted for 33.5 percent, a 1.0 percentage point decrease from the previous month, and bonds accounted for 32.3 percent, an increase of 1.3 percentage points. In terms of assets in equity funds, the percentage of stocks decreased by 0.3 percentage points compared to the previous month, whereas the percentage of savings accounts increased by 0.4 percentage points, accounting for 91 percent and 1.1 percent, respectively, of total assets in equity funds.
KOFIA plays an important role in ensuring the transparency and efficiency of the OTC fixed income market by collecting and disseminating vital trading data. KOFIA runs the Bond Quotation System, which displays bid and ask quotations in real-time to help bond traders in their transactions. KOFIA also provides many other types of bond-related data. All bond transactions must be reported to KOFIA within 15 minutes of the transaction. KOFIA posts the daily yields of 41 types of bonds and 371 closing yields. Among them, the 5-year treasury bond yield is the benchmark indicator of the Korean financial market. All bond trading data can be viewed on the Bond Information System, allowing bond traders easy access to the data. nw

Chairman Hwang Geon-ho of the Korea Financial Investment Association.