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: Quote, Profile, Research, Stock Buzz) 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: Quote, Profile, Research, Stock Buzz), Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz), Credit Suisse Group and UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), 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: Quote, Profile, Research, Stock Buzz), 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: Quote, Profile, Research, Stock Buzz) on indefinite hold.