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Volume 11, Issue 2.
In recent years, the South Korean government has given the Korea Stock Exchange (KSE) a key role to play in its drive to internationalize the economy and diversify its financial base. Such was not always the case, argues Steven Thompson in this survey of the history of the stock exchange and of Korean equity funds currently operating abroad. For ... read moreyears, the availability of government-subsidized loan capital allowed Korea's largest corporations to avoid listing themselves on the exchange, leaving the KSE weak and prone to manipulation by a few powerful speculators. Current government policy to stimulate the exchange involves a tradeoff: heavy regulations help stabilize the KSE, yet they also tend to inhibit its growth. Based on interviews with officials of the KSE and the Ministry of Finance and with Korean academics, Mr. Thompson proposes specific steps the Korean government should take to solve this dilemma.