Packing Up Seohak Gaemi... Foreign Currency Securities Holdings at Yearly Low

Q1 Hits Record $69.3 Billion, Drops to $50.3 Billion
Strong Dollar Persists Amid US Stock Market Decline
Investment Sentiment Freezes

[Asia Economy Reporter Kwon Jae-hee] The aftershocks in the capital markets caused by global interest rate hikes have not spared investors investing in the U.S. stock market. The amount of foreign currency securities held by Seohak Gaemi (Korean investors investing in U.S. stocks) reached its lowest point of the year. This is attributed to the sharp decline in the U.S. stock market and the strong dollar phenomenon, which have frozen the investment sentiment of Seohak Gaemi investing in U.S. stocks.

According to the Korea Securities Depository on the 27th, as of the 24th, the amount of foreign currency securities (U.S.) held by domestic investors was $50.39144 billion (approximately KRW 71.3694 trillion). This is the lowest level of the year both on a quarterly and monthly basis.

Following the COVID-19 pandemic, individual investors' interest in U.S. stocks increased, and the amount of foreign currency securities held in the U.S. market reached an all-time high in the first quarter of this year. In Q1, it rose to $69.35447 billion. Since then, it has steadily decreased, recently falling to around $50.3 billion.

The amount of foreign currency securities held represents the amount invested by individual investors in overseas stocks, referring to securities denominated in foreign currencies such as the dollar or securities that can be received overseas. The amount of foreign currency securities held increased every quarter but decreased for the first time in four years in Q2 this year compared to the previous quarter, and continued to decline in Q3, marking two consecutive quarters of decrease.

This downward trend is largely due to the tightening measures led by the U.S. Federal Reserve (Fed) and central banks worldwide accelerating interest rate hikes this year, causing the U.S. stock market to fall sharply. In fact, the Nasdaq index dropped from 14,920 points on January 2 to 10,970.99 points on October 26 (local time). During this period, the stock prices of Tesla, Apple, Alphabet, Nvidia, Microsoft, which are heavily held by Seohak Gaemi, also plummeted, resulting in a sharp increase in unrealized losses on overseas stocks held by Seohak Gaemi, which is believed to have contributed to the reduction in the scale of foreign currency securities held.

The "King Dollar" phenomenon is also cited as a factor that has frozen the investment sentiment of Seohak Gaemi in U.S. stocks. In March this year, the purchase amount of U.S. stocks by Seohak Gaemi was $16.98596 billion, but it has steadily decreased since then, falling to about $9.3577 billion by the end of October. In particular, the won-dollar exchange rate surpassing 1,400 won for the first time in 13 years since the end of last month is analyzed to have acted as a burden on Seohak Gaemi's investment in U.S. stocks.

As the tightening stance and strong dollar phenomenon are expected to continue for the time being, the investment sentiment of Seohak Gaemi toward the U.S. stock market is also likely to remain subdued. Park Sang-hyun, a researcher at Hi Investment & Securities, predicted, "(The recent situation) is a new dimension of currency war, and the King Dollar phenomenon caused by the U.S.'s aggressive interest rate hikes will last at least until the end of the year." Moon Nam-jung, a researcher at Daishin Securities, analyzed, "Currently, a low expectation is being formed due to the downward revision of earnings forecasts for major U.S. companies," adding, "With the cautious sentiment forming ahead of the November Federal Open Market Committee (FOMC) meeting and confusion over the November 8 midterm election results, volatility is expected to continue."

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