Extension of trading hours to take effect on Aug. 1

[THE INVESTOR] Beginning Aug. 1, South Korea will extend its trading hours for its equities, derivatives, gold futures and foreign exchange markets to boost its financial market status in line with the Morgan Stanley Capital International standards.

The Korea Exchange, the country’s quasi-sovereign stock market operator, said Sunday that the stock and bullion markets’ trading hours will be extended by 30 minutes, enabling investors to buy and sell them between 9 a.m. and 3:30 p.m. Foreign exchange brokers will also be able to trade currencies during the same hours as stocks and gold. The futures and options markets will be open from 9 a.m. to 3:45 p.m.

This would mark the first time for the market operator to alter its trading hours since 2000 when it allowed stock trading during lunch hours.

“The global markets are moving in tandem, with information affecting the world,” KRX CEO Choi Kyung-soo said in a statement.

“We need to have a market where investors can trade anytime,” he added, noting the need for further extension of its trading hours in the future.

Korea’s markets close the earliest in Asia, compared with China, which closes its stock market at 4 p.m., Hong Kong at 5 p.m. and Singapore at 6 p.m.

The Finance Ministry and the KRX decided to extend the trading hours not only to spur investment, but also in response to MSCI’s demand. The global equity index provider has been requesting Korean financial authorities to allow offshore conversion of the Korean won, and open its exchange data enabling the creation of financial products.

However, Korea could not meet MSCI’s demand, which ultimately led to the failure of Korea gaining the classification of its market status as developed.

“The investment frictions related to the lack of convertibility of the Korean won and restrictions imposed by the local stock exchange on the use of exchange data for the creation of financial products remain unaddressed,” the MSCI announced in June.

It remains to be seen whether the planned extension of its trading hours will spur investment in the main bourse, which has been slowing with capital inflow remaining at around 4 trillion won on a daily basis over the past decade.

The KRX expects that liquidity will increase by more than 3 percent in the stock market following the extension.

By Park Hyong-ki / The Korea Herald (hkp@heraldcorp.com)