Foreign investors have plenty of reasons to be wary about putting their money into South Korea. Asia's third largest economy is becoming an increasingly volatile place to do business - rules are changed retrospectively, tax treaties ignored, and the legal framework put to one side on grounds of national interest.

That is more than enough to make strategic investors and private equity funds think twice. But why have institutional investors turned away from Korea? Korea cannot compete with the growth levels of emerging markets such as China and India, corporate governance standards remain woefully low and its companies have the lowest dividend payout ratios in the region. All of this helps explain why international investors have offloaded Korean stocks for the past three years. But the trend has accelerated recently, with foreigners shedding a net $10.8bn of equities last month alone. They now own only 33 per cent of the Korean stock market, a level last seen in 2000, when the shockwaves of the Asian financial crisis were being felt.