The Peninsula

South Korea Chooses Market Stability Over Innovative Industries

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• President Moon pledged to support the bio-health industry in his five-year plan.
• In October, South Korea’s Financial Services Commission (FSC) warned investors entering the bio-health sector to be prudent.
• The FSC strengthened investigations into potentially fraudulent bio-tech companies last week.

Implications: Financial regulator’s warning to investors in the bio-health sector suggests that the government’s concern with market instability overshadows desire to rally private investment to this innovative industry. While the government has been forward-leaning on the sector’s potential for growth, the warning comes on the heels of scandals involving companies’ exaggerated disclosure of information related to clinical development, as well as insider trading allegations. There are concerns that the FSC’s public statement may dampen private investments to this innovative sector. Nonetheless, the government appears to have calculated that small losses today may be less costly than a bigger crisis down the road.

Context: Scandals have already caused market volatility in the bio-health sector. Samsung Biologics, the country’s biggest pharmaceutical company, committed accounting fraud and is currently under investigation. Meanwhile, Kolon TissueGene intentionally falsified its documents to win a license. Revelation of this criminal behavior led to the suspension of transactions involving this medicine. Sillajen was accused of insider trading and spooked investors panicked when the company’s executive dumped $7.4 million-worth of of the stocks.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Picture from Wikimedia Commons