[Asia Economy Reporter Minji Lee] Given that changes in the investment environment can occur rapidly, it is advisable to approach foreign currency securities investment with caution. In the case of overseas stocks, information asymmetry is more severe compared to domestic stocks, making it difficult to respond quickly when negative issues arise.
According to the Korea Securities Depository on the 27th, the balance of overseas securities held by domestic stock investors was recorded at $80.8 billion as of the third quarter of this year. This represents a decrease of about 26% compared to the custody amount, which nearly reached $100.5 billion in 2021. The decline is attributed to the rapid evaporation of the market capitalization of invested assets due to the stock market downturn.
The Korea Securities Depository emphasized the need for a cautious approach as global stock market volatility intensifies. Although the investment environment is rapidly changing due to factors such as the Russia-Ukraine war and U.S. interest rate hikes, investors have limited access to information compared to domestic securities.
For example, when provocative local issues cause a sharp drop in stock prices, domestic investors find it difficult to respond quickly due to time zone differences between countries. In fact, when the Russia-Ukraine war broke out, trading of Russian company stocks was abruptly suspended due to sanctions, and domestic investors were unable to respond promptly. The same was true when Chinese company stocks were suspended from trading amid U.S.-China tensions.
The Depository stated, “Due to overlapping operational structures involving multiple domestic and international institutions, differences in laws and regulations by country, time zone differences, complex and diverse operational processes, and considerable processing time, the environment is quite different from investors’ expectations.” They added, “We will continue to promote operational efficiency to notify securities firms of settlement and rights exercise information as quickly as possible, but individuals also need to approach overseas stocks cautiously.”
Meanwhile, the Depository provides services such as custody, settlement, and rights exercise through securities firms when domestic investors trade foreign currency securities. It currently holds over 22,000 items from 40 countries, including developed markets like the U.S., Japan, Hong Kong, and the U.K., as well as emerging markets such as China, Vietnam, and Indonesia.
The stocks most held by domestic investors are mostly from the U.S., accounting for 64% of the total custody amount. The top five stocks by custody amount are all U.S. stocks: Tesla, Apple, Nvidia, Alphabet A, and Microsoft.
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