SEOUL (AFP) - South Korea will open a third stock market in July focused on small business ventures looking to raise capital, market operators said on Friday.

The Korea New Exchange (KONEX), part of President Park Geun Hye's plan to foster a "creative economy" that encourages innovation and entrepreneurship, will open on July 1, Korea Exchange vice chairman Choi Hong Sik said.

"We expect that the KONEX market will make a significant contribution to developing the creative economy," Mr Choi said.

Some market watchers have voiced scepticism over the future of the KONEX, citing problems encountered by other countries in opening and maintaining a third stock exchange.

Only viable venture firms with growth potential will be selected for a KONEX listing, he said, urging foreign investors seeking a "high risk and high return" opportunity to take a close look.

Various incentives would be offered, with angel investors receiving tax cuts and allowed to defer tax payments as long as they reinvest their returns in fresh business ventures.

Public funds will initially be encouraged to invest in the new market.

Mr Choi said the government would ease regulations to bring in companies that are not ready to list on the tech-heavy KOSDAQ market, and to promote mergers and acquisition of KONEX-listed firms.

Between 20 and 30 firms will be listed when the exchange opens, but Mr Choi predicted a swift expansion to around 1,000 companies. Those that perform well will be allowed to graduate to the two main stock exchanges, he added.