Different countries have differing attitudes toward foreigners who invest in their stock market. The U.S., for example, welcomes them with open arms. In our part of the world, Hong Kong and Singapore stand out for going out of their way to attract overseas investors.
   At the other end of the spectrum are countries, such as Vietnam and China, who try to turn foreign investors away. Korea belonged to this hermit group some twenty years ago, but gradually broke free ­ to the point of being nearly completely open today.
Economic reasoning played an important role in opening up the Korean stock market. Indeed, full-blown market opening took place only after Korea caught the Asian Financial Bug in 1997 and fell into a severe recession.
   The barriers are down. But today Korea as a nation has a love-hate relationship with foreign investors. Evidently, opening markets is easier than opening the mind.
The argument for welcoming foreign investors is very well understood and embedded in mainstream economic logic: foreign investors bring in capital, which in turn strengthen businesses and create jobs. Other possible benefits are transfers of technology, managerial skills, global network, and so on.
   A secondary benefit (in the sense that it works indirectly, via the market at large) is the information processing capabilities of foreign investors. Smart local investors take this to mean that they should mimic the investment patterns of the foreigners. But on another dimension, global investors are imposing a tough and rigorous discipline on Korean firms, simply by evaluating them against all other companies in the world.
Samsung Electronics, most highly valued company in the Korean market at 75 trillion won, is the darling of overseas investors. These days, foreigner investors own roughly 80 million shares out of the 147 million total shares issued, representing a whopping 55 percent ownership of this world-class company. I personally find this comforting. However, I am also aware that many of my fellow countrymen find this same fact disturbing.
   What if the foreign investors will band together, kick out the current management team lead by Samsung Chairman Lee Kun-hee, and move the company to another country? In short, there is danger that Samsung Electronics will no longer be Korean.
Provocative behavior by self-proclaimed corporate governance specialist funds such as Sovereign (caused a raucous at SK Corporation) and Hermes (gave out wrong information regarding Samsung Corp.), instead of instilling confidence, has done much to fuel local anxiety.
   The negative sentiment toward foreign capital is gaining critical mass. Many Koreans now question the wisdom of letting foreign capital control such a large proportion of the nation? financial industry in general, and banks in particular.
Korean legislators currently are looking at ways of curbing ?xcessive foreign capital. Exactly how they plan to do this remains to be seen. My hope is that reason prevails over emotion. Why burn the bed to catch a flea?

<The column ◆Quid Pro Quo◆ by Professor Eugene Yun (International Studies) will be published throughout this semester.>

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