SEOUL • South Korea President Moon Jae-in will invest in a local equity fund that bets on companies the government is supporting amid its trade dispute with Japan.

Mr Moon will invest an unspecified amount in the NH-Amundi Victorious Korea Equity Fund, the presidential office said in a statement yesterday.

The fund, started on Aug 14 with about US$24 million (S$33.3 million), invests in South Korean suppliers that may benefit from Japan's export curbs on key materials needed for the country's semiconductor industry.

Mr Moon said South Korean parts and materials suppliers should develop more so that the economy is not "affected by external factors", according to the presidential office.

The semiconductor industry accounts for nearly 20 per cent of total exports in South Korea's export-driven economy.

The Moon administration announced on Aug 7 that it would spend US$6 billion on research and development for local companies that develop key materials, parts and equipment for the country's manufacturing industry.

A number of South Korean stocks have rallied recently on hopes that they may win more orders from industrial leaders, including Samsung Electronics and SK Hynix, amid Japan's restrictions.

The feud with Japan over colonial-era grievances has snowballed over the past two months and shows no signs of abating.

South Korea last week withdrew from a key intelligence-sharing pact, and its armed forces started training on Sunday near islands that are claimed by both nations.

The benchmark Kospi index is down 10 per cent since the end of June, more than double the decline in the MSCI All-Country World Index.

This is not the first time that a South Korean president has invested in local equities to promote an economic agenda.

Mr Roh Moo-hyun invested 80 million won in several funds targeting Kosdaq index stocks in July 2005 in order to support small and medium-sized firms, according to JoongAng Ilbo.

The tech-heavy gauge surged 85 per cent that year.

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