Foreign Currency Securities Investment Abroad Down $6.1 Billion in Q1... Largest Ever Decline in Bond Investment

The Bank of Korea's Foreign Securities Investment Trends by Major Institutional Investors in Q1 2021

[Asia Economy Reporter Eunbyeol Kim] As interest rates rose in major countries, the balance of overseas foreign currency securities investments by domestic institutional investors decreased by more than $6 billion in the first quarter of this year.

According to the Bank of Korea on the 28th, the balance of foreign currency securities investments by major domestic institutional investors (based on market value) stood at $363.1 billion as of the end of March, down $6.1 billion (approximately 6.8 trillion KRW) from the end of last year.

By investor type, the investment balances of insurance companies (-$5.99 billion), securities firms (-$1.39 billion), and foreign exchange banks (-$720 million) decreased. Only asset management companies (+$1.99 billion) saw an increase.

A Bank of Korea official explained, "In the first quarter, as interest rates rose significantly in major countries, especially bond prices fell, resulting in valuation losses. Additionally, the US dollar strengthened in the first quarter, causing foreign exchange valuation losses."

Among investment products, the balance of foreign bond investments decreased by $8.75 billion in the first quarter alone. This decline exceeded the $4.9 billion drop in the first quarter of last year, marking the largest quarterly decrease on record.

The Bank of Korea explained that foreign bond investments decreased mainly among insurance companies (-$5.6 billion) and asset management companies (-$3.08 billion) due to the rise in US interest rates during the first quarter.

The balance of foreign currency-denominated securities (Korean Paper) issued abroad by domestic financial institutions or companies also decreased by $2.92 billion.

On the other hand, foreign stocks increased by $5.57 billion, mainly driven by asset management companies (+$5.5 billion), influenced by rising stock prices in major countries. Major countries such as the United States (+7.8%), the European Union (+10.3%), Japan (+6.3%), and Hong Kong (+4.2%) saw stock prices rise during the first quarter of this year.

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