It has been revealed that both individual investors and institutional investors in South Korea earned over 100 trillion won through overseas stock and fund investments last year.
According to the international investment position report from the Bank of Korea on April 21, the balance of equity securities such as overseas stocks and funds held by individuals and institutions at the end of last year amounted to US$623.5 billion, representing an increase of US$104.2 billion compared to the previous year. This marked the first time it surpassed the US$600 billion mark. The balance of overseas equity securities surged from US$463.3 billion in 2020 to US$592 billion in 2021. However, in 2022, the figure decreased to US$519.4 billion with the downturn in the U.S. stock market.
The increase in the balance of overseas equity securities last year can be attributed to two main factors. First, there was a significant increase in purchasing stocks in the U.S. market. It was revealed that an additional US$29.7 billion worth of overseas stocks were bought last year. Secondly, capital gains also rose by US$74.5 billion with the surge in indices such as the U.S. NASDAQ and increased dividend yields. The NASDAQ index rose by 43.4 percent last year. The Dow Jones Industrial Average (DJIA) increased by 13.7 percent, the Euro Stoxx 50 index by 19.2 percent, and the Japanese Nikkei 225 index by 28.2 percent.
Individual investors have been criticized for exchanging won into U.S. dollars to invest in overseas stocks, attributing it to the depreciation of the won. However, the current sentiment differs. There is a prevailing outlook that the overseas stocks accumulated by South Korean individuals and institutions have turned into a “foreign exchange safety net.” As global financial markets become turbulent, there is an anticipation that South Korean institutions and households might increase their demand to sell foreign assets such as overseas stocks and convert them into won. This perception has contributed to lowering financial market volatility, including exchange rates.
According to last year’s current account balance data, the “securities investment dividend income,” representing the dividends received from overseas stocks held by individual investors and institutions, reached a record high of US$108.71 billion last year, showing an increase of US$262.2 million from the previous year. It is assessed that such dividend income significantly contributed to the expansion of the current account surplus.