S.Koreans' global shareholdings at record $588.5 bn

South Korean institutional and retail investors sharply raised their risk appetite last year, gobbling up Nasdaq-listed technology stocks such as Tesla Inc. and Apple Inc., data showed on Wednesday.

The balance of their combined overseas shareholdings swelled to a record $588.5 billion as of end-December, 2021 on a preliminary basis, versus $463.8 billion a year earlier, according to the Bank of Korea (BOK).

The on-year increase of $124.7 billion marked the largest since the central bank began compiling the data in 1994, as South Koreans further increased their exposure to US stocks in search of higher returns in an era of record-low interest rates.

Of the net increase, $56.2 billion was attributed to valuation gains thanks to the bull run in US stock markets, the BOK said on Feb. 23 in a statement on the International Investment Position in 2021.

Last year, the Nasdaq index shot up 21.4% and the Dow Jones Industrial Average jumped 18.7%. The EURO STOXX 50 index climbed 21.0%.

South Korean individual and professional investors in 2021 together scooped up a net $2.87 billion of Tesla shares and a net $771.7 million of Apple shares, according to the Korea Securities Depository.

Third on their buy list was TQQQ7, an exchange-traded fund (ETF) aiming to deliver three times the return of the Nasdaq 100 index. They bought a net $757 million of the ETF last year. 

BUFFER AGAINST GLOBAL MARKET VOLATILITY

Koreans' overseas shareholdings are making a bigger contribution to the country's current account surplus, acting as a buffer for the local economy.

Their dividend incomes from overseas shareholdings hit a record $9.2 billion in 2021, accounting for about one-tenth of South Korea's 2021 current account surplus of $88.3 billion.

When global financial markets wobble, Korean investors' selling of overseas stocks leads to demand for the won currency, which should keep the dollar/won rate stable.

South Korea’s net international investment position (IIP) stood at a record $637.9 billion as of end-2021, up $171.8 billion over the year. The IIP refers to the balance of South Korea’s overseas investments of $2,161 billion minus the outstanding amount of $1,523.1 billion foreign investment in the country.

The country's short-term external debts against foreign exchange reserves dipped 0.1 percentage point on-year to 35.9% as of end-2021, but still higher than the 31.1% recorded at end-2018.

On Thursday, the BOK left interest rates steady at 1.25% following back-to-back hikes the previous two months. 

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article