Seoul: Financial commitments held by foreign investors in South Korea rose at the sharpest pace ever to a new record high in the second quarter, driven by a rally in the local stock market, central bank data showed Thursday. The outstanding amount of foreign investment stood at US$3.02 trillion as of end-June, up $891.2 billion from three months earlier, according to preliminary data from the Bank of Korea.
According to Yonhap News Agency, it was the first time that the amount surpassed the $3 trillion threshold and marked the largest on-quarter increase since 1994, when the central bank started compiling such data. Non-residents' securities investment rose $859.3 billion to $2.33 trillion, while direct investment increased $400 million to $321.1 billion. "The sharp rise in domestic stock prices increased the valuation of foreign investors' holdings of Korean equities," the BOK said.
The benchmark Korea Composite Stock Price Index (KOSPI) surged 67.8 percent in the second quarter. At the same time, the country's external financial assets, or the outstanding amount of Korean residents' investment abroad, increased $201.7 billion won to a record $3.08 trillion as of end-June. The on-quarter increase also marked the sharpest ever.
Of external financial assets, residents' securities investments added $142.7 billion on-quarter to $1.38 trillion as of end-June on the back of a rally in the U.S. stock market, while their direct investment rose $20.8 billion to $872.5 billion from three months earlier. Over the three-month period, the Dow Jones Industrial Average rose 12.9 percent and the tech-heavy Nasdaq composite jumped 21.4 percent, the BOK added.
As the increase in external financial liabilities sharply outpaced that of external financial assets, the country's net international investment position fell $89.5 billion on-year to $64 billion, marking the lowest level since the third quarter of 2014.