JPMorgan averts Korean allocation crisis

How a legal opinion about KEB''s status nearly proved a $140 million allocation crisis for JPMorgan in Korea.

While Korea is Asia's most exciting market at the moment, its legal system can still throw-up some pretty amazing pitfalls, as JPMorgan discovered last Thursday.

Indeed, thanks to an oversight, the bank nearly ended up with a $140 million shortfall of stock that it could not allocate to foreign fund managers.

The Korean government is selling its remaining 28.6% stake in KT Corp. While Korea Telecom is already 49% owned by foreign fund managers, this latest divestment will see 5.7% sold to employees, 15% to other Korean companies, 3.7% to domestic retail investors and 4% to institutional investors.

The last tranche was to be split equally between existing shares and an exchangeable bond...

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