U.S. banks plan to invest under new Korea head

By Soyoung Kim

NEW YORK, April 16 (Reuters) - Top executives at Wall Street banks said on Wednesday the free-market policies of South Korea's new president would rekindle appetite for investing in Asia's fourth-largest economy, which has been seen as unfriendly to foreign investment in recent years.

South Korean President Lee Myung-bak, a former businessman, took office in February, pledging to remove regulations that hinder foreign investment.

"Lee has a very inviting approach. I think financial firms' investment to Korea will certainly rise under his leadership," Robert Hormats, vice chairman of Goldman Sachs International (GS.N) told Reuters.

He was speaking before a luncheon in New York hosted by Lee for top executives at major banks including Goldman, JPMorgan Chase & Co, Merrill Lynch & Co MER.N, Blackstone Group (BX.N), Credit Suisse Group and UBS AG (UBSN.VX), before Lee headed to Washington to meet U.S. President George W. Bush and members of Congress.

Asked if he thinks Goldman Sachs would increase its investments in South Korea, Hormats said, "Probably."

Western firms had become increasingly concerned about investing in Korea, amid a public backlash against foreign investors, such as Newbridge Capital, after they made handsome returns buying up distressed assets in the wake of the 1997-98 Asian financial crisis and reselling them years later.

Adding fuel to the rising concern, South Korean prosecutors launched an investigation into U.S. private equity fund Lone Star's $1.2 billion purchase in 2003 of Korea Exchange Bank (004940.KS), saying the Korean bank was undervalued and sold for about a third less than it was worth.

The ongoing legal saga has put Lone Star's $6.3 billion deal in 2007 to sell Korea Exchange Bank to HSBC Holdings Plc (HSBA.L) on indefinite hold.

This could change under Lee, an outspoken advocate of open-market policy, Wall Street chief executives said.

"Lee sounded quite inviting and forward-looking. I think the new president sent some very encouraging signals," said Robert Shafir, chief executive of Credit Suisse America (CSGN.VX).

JPMorgan Chase & Co (JPM.N) Chief Executive Jamie Dimon said, "JPMorgan has been in Korea for 40 years, and I think we'll be able to do better under Lee."

Dimon also congratulated Lee on his conservative party winning a majority in parliamentary elections last week. Analysts said the majority would give Lee more power to push for his market-oriented and economic growth policies.

Addressing an investor forum following the luncheon, Lee reaffirmed his pledge to entice foreign investment by removing regulations and making costs for labor and factory sites affordable.

"Excessive regulations are always the biggest barrier to business activities of both foreign and domestic companies," Lee said.

"All rules and regulations that do not conform to the global standards will be revised." (Editing by Gary Hill)