COVID-19 Driven Stock Investment Boom... External Financial Assets and Liabilities Increase Side by Side

Bank of Korea '2020 Year-End Regional and Currency International Investment Position'

[Asia Economy Reporter Kim Eunbyeol] Following the global monetary easing after the spread of COVID-19 last year, investment in financial markets became active worldwide, leading to a simultaneous increase in South Korea's external financial assets and liabilities balances.

According to the "2020 Year-end Regional and Currency-based International Investment Position" released by the Bank of Korea on the 23rd, South Korea's external financial assets balance at the end of last year was $1,519.7 billion, an increase of $207.2 billion compared to the previous year-end. External financial assets refer to the amount Koreans invested in foreign financial products or companies' direct investments overseas.

By investment region, the largest investment was in the United States at $534.5 billion (35.2%), followed by the EU ($291.9 billion, 19.2%), and Southeast Asia ($201.5 billion, 13.3%).

In particular, the investment balance in the United States surged by $114.8 billion compared to the previous year. This was influenced by the rise in U.S. stock prices and the rapid increase of "Seohak Gaemi" (Korean investors investing in U.S. stocks). The investment balance in the EU increased by $40.3 billion, affected by the appreciation of the euro. Notably, investments in the U.S. were high across direct investment, securities investment, and other investments. In Southeast Asia, direct investment was predominant.

The external financial liabilities balance, which refers to the amount foreigners or foreign companies invested in Korean financial products or direct investments, was $1,496.7 billion at the end of last year, an increase of $293.2 billion compared to the previous year.

By investment region, the United States was the largest at $405.5 billion (27.1%), followed by the EU ($377.4 billion, 25.2%), and Southeast Asia ($293.3 billion, 19.6%). Compared to the previous year-end, investment balances increased due to domestic stock price rises: U.S. (+$84.2 billion), EU (+$76.3 billion), and Southeast Asia (+$70.4 billion).

Regarding the currency composition of South Korea's external financial assets and liabilities, assets were mainly in U.S. dollars (56.7%), euros (10.6%), and Chinese yuan (7.3%), while liabilities were predominantly in Korean won (70.7%), U.S. dollars (23.6%), and euros (2.2%).