Domestic Investors' Overseas Stock Investment in July Rises to $5.26 Billion... Current Account Surplus Hits 9-Month High (Update)

Bank of Korea 'July 2020 Balance of Payments (Preliminary)'

[Asia Economy Reporter Kim Eun-byeol] Despite the spread of the novel coronavirus infection (COVID-19), the current account surplus in July recorded the largest surplus in nine months. As major countries' stock markets continued their strong performance, domestic investors' overseas stock and bond investments increased for the fourth consecutive month. When considering only overseas stock investments, the upward trend continued for 53 consecutive months.

According to the "July 2020 Balance of Payments (Provisional)" released by the Bank of Korea on the 4th, the current account surplus in July recorded $7.45 billion, increasing from $6.88 billion in June. Compared to the same month last year ($6.58 billion), the surplus increased by about 13%, marking the largest surplus in nine months since October 2019 ($7.83 billion).

Exports decreased centered on petroleum products and automobile parts, recording $43.2 billion, marking a decline for five consecutive months compared to the same month last year. Compared to exports in July last year ($48.42 billion), this is a 10.8% decrease. However, imports declined more sharply than exports. Due to weak prices of energy products such as crude oil and gas, imports of raw materials continued to decrease for five consecutive months. Imports in July were $36.23 billion, down 14.2% compared to the same month last year. As a result, the goods balance recorded a surplus of $6.97 billion, expanding the surplus by $790 million compared to the same month last year.

The services balance recorded a deficit of $1.11 billion, narrowing the deficit compared to the same month last year (-$1.55 billion). This was influenced by a sharp decrease in overseas departures due to the COVID-19 situation, with travel payments ($880 million) significantly reduced compared to the same month last year ($2.9 billion). In the transportation balance, although income from air passenger transportation decreased, the deficit was limited to $200 million due to increased air freight charges. Compared to the same month last year (-$210 million), the deficit narrowed by $190 million.

Meanwhile, despite the spread of COVID-19, major countries' stock markets continued their strong performance through July, leading to continued growth in domestic investors' overseas stock and securities investments. Looking at the financial account, domestic investors' overseas securities investments increased by $4.67 billion, continuing the upward trend for four consecutive months since April. Considering only overseas stocks, domestic investors' investments increased by $5.26 billion, marking 53 consecutive months of growth since March 2016. Overseas bond investments decreased by $600 million, turning to a decline. A Bank of Korea official explained, "Overseas stock investments continued to increase due to the strong performance of major countries' stock markets, while overseas bond investments turned to a decline mainly among institutional investors."

Foreign investors' domestic securities investments also showed an upward trend. Expecting improvements in corporate earnings, foreign investors' domestic stock investments increased by $1.29 billion, marking two consecutive months of growth. Foreign investors' bond investments increased by $3.79 billion, showing an upward trend for seven consecutive months. Both domestically issued and overseas issued bonds continued to increase.

This content was produced with the assistance of AI translation services.