Current Account Surplus Hits 9-Month High, Domestic Overseas Investment Reaches 36 Trillion Won from January to July (Comprehensive)

Exports Declined for 5 Consecutive Months, but Import Drop Was Larger
Domestic Overseas Stock Investment Reached 36 Trillion Won from January to July... Second Highest Ever

[Asia Economy Reporter Kim Eun-byeol] Despite the spread of the novel coronavirus infection (COVID-19), the current account surplus in July increased to the largest in nine months. Although the real economy recovery remains distant, domestic investors' overseas stock investments increased due to expectations of a rising stock market, ranking second highest on a cumulative basis from January to July. Domestic investors' overseas stock investments have increased for 53 consecutive months.

According to the 'July 2020 Balance of Payments (Provisional)' announced by the Bank of Korea on the 4th, the current account recorded a surplus of $7.45 billion in July. This is the largest surplus in nine months since October 2019 ($7.83 billion), with the surplus increasing by about 13% compared to the same month last year ($6.58 billion).

The improvement in the goods balance had a significant impact. Exports in July were $43.2 billion, down 10.8% year-on-year, marking the fifth consecutive month of decline. However, imports were $36.23 billion, with a larger decline (-14.2%) than exports. As a result, the goods balance surplus expanded by $790 million year-on-year to $6.97 billion.

Lee Sung-ho, head of the Financial Statistics Department at the Bank of Korea's Economic Statistics Bureau, explained, "Exports to China reversed to an increase in June, and exports to the United States rose in July, continuing the improving trend in exports. Regarding imports, capital goods increased, but energy imports decreased due to the fall in crude oil prices."

Seongho Lee, Head of the Financial Statistics Department at the Economic Statistics Bureau of the Bank of Korea, is explaining the main features of the July 2020 balance of payments (provisional) on the morning of the 4th at the Bank of Korea in Jung-gu, Seoul.

The services balance recorded a deficit of $1.11 billion, with the deficit narrowing compared to the same month last year (-$1.55 billion). This was due to a sharp decline in outbound travelers, which reduced the travel balance deficit (-$370 million) by $760 million year-on-year.

The overseas stock investment boom continued to drive an increase in domestic investors' overseas securities investments. Domestic investors' overseas securities investments (stocks + bonds) increased by $4.67 billion, marking the fourth consecutive month of growth. Looking at overseas stocks alone, domestic investors' investments increased by $5.26 billion, continuing a 53-month consecutive increase since March 2016. On a cumulative basis from January to July, domestic investors' overseas stock investments amounted to $30.62 billion, ranking second highest since 2007 ($32.25 billion). If this trend continues, there is a possibility that the annual overseas stock investment amount will rank first this year. The overseas stock investment boom by individuals, such as the 'Seohak Ants,' supported this trend. In July, the scale of overseas stock investments by non-financial corporations and others (including individual investors) was $2.96 billion, accounting for 56%. This is a change from the past when overseas stock investments were mainly made by financial institutions.

Foreigners' domestic securities investments also showed an increasing trend. Expecting improvements in corporate earnings, foreigners' domestic stock investments increased by $1.29 billion, marking the second consecutive month of growth. Foreigners' bond investments increased by $3.79 billion, showing a seven-month consecutive increase.

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