Hitting Record High
Korean investors' overseas stock investments rocketed, leading the financial assets overseas held by Koreans to surpass US$1.33 trillion for the first time.
According to the data titled “International Investment Calculating Table at End of June 2017” released by the Bank of Korea on August 24, financial assets in overseas extended by US$34.9 billion to US$1.33 trillion which is the highest ever.
Foreign financial assets refer to the amount of overseas investment made by Koreans. Specifically, direct investment in foreign financial assets increased by US$9.5 billion to US$330.9 billion while securities investment jumped by US$27.4 billion to US$ 363.5 billion.
Securities investments are classified into equity securities (stocks, mutual funds, etc.) and debt securities (bonds, etc.). Equity securities swelled by US$15.9 billion to US$21.1 billion while debt securities by US$11.5 billion to US$15.19 billion.
Stocks in the US stock market rose 3.3 percent in the second quarter (April-June) and those in the Chinese (0.9 percent), Japanese (5.9 percent) and Hong Kong (6.9 percent) stock markets climbed. On the other hand, stocks in the European Union slid 1.7%.
The US accounted for 46.5% of Korean investors’ overseas investment, followed by the EU with 23.0%, Japan with 6.1%, China with 4.2% and Hong Kong with 3.7%.
Foreign financial liabilities which refer to amounts invested in Korea by foreigners also reached a record high of US$1.15 trillion (US$ 1,300), up US$47.3 billion from the previous quarter.
Foreign direct investment in Korea fell by US$1.2 billion due to non-trading factors such as exchange rate fluctuations, but securities investment reached US$712.9 billion, an increase of US$49.1 billion. It is said that the KOSPI jumped 10.7% in the second quarter which significantly affected foreign investors. During the second quarter, the Korean won depreciated 2.1% against US dollar.
Net foreign financial assets, which exclude foreign financial liabilities from external financial assets, were US$224.1 billion, down US$12.3 billion from the previous quarter. They fell for the second consecutive quarter. This is blamed on the fact that foreign financial liabilities increased more than foreign financial assets mainly due to non-transaction factors such as valuation gains on a rise in Korean stock prices.
Both Korea’s foreign debts and foreign credits expanded. At the end of June, the foreign debts spiked by US$1.7 billion to US$407.3 billion while external credits shot up by US$17.4 billion to US$830.5 billion. As a result, net foreign credits (credits minus debts) hit a record high of US$423.1 billion, an increase of US$15.7 billion from the previous quarter.
The percentage of short-term foreign debts (short-term debts/total foreign debt which is an indicator of foreign exchange soundness and external payment ability increased by 0.4 percentage points from the previous quarter to 28.8%, the highest level since the third quarter of 2014 (29.1%) and the short-term foreign ratio (short-term foreign debts/reserve assets) swelled by 0.1 percentage point to 31.8% from the previous quarter, the highest since the third quarter of 2015 (31.3%).