Seoul, South Korea – South Korea's net foreign assets have surpassed $900 billion for the first time, marking a historic high. This surge can be attributed to the increasing number of domestic investors, often referred to as "retail investors," pouring money into overseas stock markets.
According to the Bank of Korea’s latest international investment position data, the country's net foreign assets reached $977.8 billion at the end of the third quarter, marking a $119.4 billion increase from the previous quarter. This is the highest level on record and the second-largest quarterly increase ever.
The growth in net foreign assets was primarily driven by a surge in overseas securities investments. South Korean residents increased their holdings of foreign stocks and bonds by $64.6 billion during the quarter, bringing the total to a record $996.9 billion. Given the current trend, it is expected that the value of South Korean residents' overseas securities investments will surpass $1 trillion by the end of the year.
US stocks were the primary target of South Korean investors, accounting for more than half of the increase in overseas equity investments. However, investments in European and Chinese equities also contributed to the overall growth. The strong performance of global stock markets, particularly in the US and Europe, boosted the valuation of these investments.
In contrast, foreign investors reduced their holdings of Korean securities by $267 billion during the quarter, leading to a decline in the country's foreign liabilities. This was mainly due to a decrease in foreign investment in Korean stocks.
"The increase in South Korean residents' overseas securities investments can be attributed to a combination of factors, including strong global stock markets, favorable exchange rates, and a shift in investment preferences away from domestic markets," said Park Sung-gon, director of the Foreign Investment Statistics Team at the Bank of Korea.
While the surge in overseas investments has boosted South Korea's net foreign assets, it has also led to an increase in the country's short-term external debt ratio. This ratio, which measures the country's ability to meet its short-term foreign debt obligations, rose to 37.8% in the third quarter from 34.4% in the previous quarter.
Despite the increase, the Bank of Korea assessed that South Korea's external debt situation remains sound, given that the ratio is still relatively low compared to historical levels.
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