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SEOUL, July 11 (Reuters) - Money manager BlackRock Inc won approval to launch an asset management business in South Korea, the country's financial watchdog said on Friday, becoming the 17th foreign fund manager in the $335 billion market.

BlackRock (BLK.N: Quote, Profile, Research), 49.8 percent owned by Merrill Lynch MER.N, comes just after Lazard Ltd (LAZ.N: Quote, Profile, Research), which got the nod to open local fund management operations last month, and joins the likes of Goldman Sachs (GS.N: Quote, Profile, Research), Credit Suisse (CSGN.VX: Quote, Profile, Research), JPMorgan (JPM.N: Quote, Profile, Research) and ING Groep (ING.AS: Quote, Profile, Research)(ING.N: Quote, Profile, Research).

Two small-sized South Korean companies also won asset management licenses, bringing the number of asset managers in the country to 58, the Financial Supervisory Service said in a statement.

South Korea's asset management industry has been growing at a double digit rate, buoyed by retail money inflows to stock funds and as pension funds and institutional investors diversify into higher-yielding investment assets.

Deregulation scheduled for February 2009 will allow fund houses to introduce and package funds based on various assets, from commodities to derivatives.

AllianceBernstein (AB.N: Quote, Profile, Research), a New York-based money management group, and AIG (AIG.N: Quote, Profile, Research) have also applied for fund business licenses, an official at the financial watchdog said.

AXA (AXAF.PA: Quote, Profile, Research), Europe's second-biggest insurer, agreed to buy half of a South Korean asset manager from unlisted Kyobo Life Insurance Co for an undisclosed sum, Kyobo said last month.

The fund management sector was a money spinner last year when global stocks rallied thanks to heavy money inflows before the U.S. subprime mortgage crisis started.