Trends in Foreign Currency Securities Investments by Major Institutional Investors in Q3
USD 24.67 Billion Increase... Continued Net Investment in Foreign Stocks and Bonds Plus Valuation Gains
In the third quarter of this year, the outstanding balance of foreign currency securities investments by major institutional investors in South Korea reached a new all-time high once again. This result was driven by continued net investments in foreign stocks and bonds, fueled by rising stock prices in major countries and interest rate cuts by the US Federal Reserve, as well as valuation gains.
According to the "Trends in Foreign Currency Securities Investments by Major Institutional Investors for the Third Quarter" released by the Bank of Korea on December 1, the outstanding balance of foreign currency securities investments by major institutional investors-including asset management companies, insurance companies, foreign exchange banks, and securities companies-stood at USD 490.21 billion (based on market value) as of the end of September this year. This represents an increase of USD 24.67 billion (5.3%) during the third quarter. This is the largest quarterly balance ever recorded.
The outstanding balance of foreign currency securities investments had been increasing from USD 387.83 billion in the fourth quarter of 2023 to USD 427.67 billion in the third quarter of last year, before temporarily slowing to USD 420.71 billion in the fourth quarter of last year. However, it rebounded to USD 430.78 billion in the first quarter of this year.
By product, the balance of foreign stocks reached USD 276.29 billion, up USD 19.13 billion from the second quarter. The increase in foreign stocks was attributed to valuation gains resulting from rising stock prices in major countries and expanded net investments, particularly by asset management companies. During the third quarter, major stock market returns were as follows: S&P 500 (7.8%), Nasdaq (11.2%), Euro Stoxx 50 (4.3%), and Japan's Nikkei 225 (11.0%).
The balance of foreign bonds stood at USD 180.69 billion, up USD 4.66 billion during the same period. Valuation gains were realized due to falling US Treasury yields following the Fed's interest rate cuts, and the balance increased as net investments continued, especially by insurance companies and securities firms. Korea Paper, foreign currency-denominated securities issued overseas by domestic companies, increased by USD 880 million, mainly through foreign exchange banks and securities companies.
By investor type, the investment balance of asset management companies rose by USD 17.85 billion from the second quarter to USD 342.96 billion. The balances for insurance companies (up USD 3.36 billion), securities companies (up USD 2.01 billion), and foreign exchange banks (up USD 1.46 billion) also increased.
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