As the foreign investor integrated account system is being modified to allow direct investment in ETFs (exchange-traded funds) following domestic stocks, brokerage firms are also accelerating their preparations. Although transactions through foreign investor integrated accounts do not yet account for an overwhelmingly large share of trading volume, they are seen as a new competitive edge in terms of expanding retail customers from domestic to overseas markets.
According to the financial investment industry on the 17th, recent amendments to the Financial Investment Business Regulations by financial authorities now permit foreign investors to invest in domestic ETFs and ETNs (exchange-traded notes) through foreign investor integrated accounts. This measure expands the scope of tradable products under foreign investor integrated accounts from existing domestic stocks to include ETFs and ETNs. However, leveraged and inverse ETFs are excluded.
The integrated account system allows overseas local investors to trade Korean stocks through local securities firms without having to open accounts directly at domestic brokerage firms.
Industry experts anticipate that full-scale trading will commence on January 1 next year when the amended tax laws, including withholding provisions, take effect. The 2026 tax reform plan has decided to apply special withholding tax exemptions starting January 1 next year, following the expansion of tradable products under foreign investor integrated accounts. This involves domestic securities firms withholding taxes on income such as dividends paid to foreign financial investment firms (including overseas securities firms) that have established foreign investor integrated accounts through them. Domestic securities firms will first withhold taxes from overseas securities firms, which will then collect the taxes from foreign investors—a convenient arrangement for foreign investors.
Brokerage firms are also accelerating their preparations. Foreign investor integrated accounts can serve as a new competitive factor since they offer a means to secure overseas customers. While it is unlikely that these accounts will account for an absolute share of total brokerage firm revenues or experience rapid growth, simply maintaining the integrated account system could generate additional retail revenue. Some analyses suggest that expanding product options beyond individual domestic stocks to include ETFs could further broaden access to domestic investment opportunities.
Hana Securities, which launched the foreign investor integrated account service first in the industry last October, reported net foreign purchases exceeding 1 trillion won. Samsung Securities, which introduced its service in May, is known to have average daily trading volumes through its foreign investor integrated accounts in the range of several hundred billion won.
Mirae Asset Securities signed an agreement with Singapore-based major securities firm UOB Kay Hian in June and launched the service. Shinhan Investment Corp, NH Investment & Securities, KB Securities, and Meritz Securities are also reviewing or preparing to offer similar services.
Kim Sung-hoon, a researcher at Hyundai Motor Securities, stated, "Foreign investor integrated accounts should be viewed not primarily for their short-term contribution to performance but rather in terms of enhancing retail competitiveness through expanded touchpoints with overseas retail customers." He added, "If ETF trading is also permitted, the range of product choices will broaden, accelerating growth in trading volumes."
A securities industry official remarked, "Foreign investors who opened accounts at domestic brokerage firms and subsequently established foreign investor integrated accounts locally wish to transfer their stocks to the integrated account system, but this remains impossible for now. As a service designed specifically for foreign investors, inconvenient aspects must be improved in the future."
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