Last Year, Institutional Foreign Currency Securities Balance Decreased by $42.3 Billion..."Expanded Valuation Losses"

[Image source=Yonhap News]

The Bank of Korea announced on the 2nd that the balance of foreign currency securities investments (market value basis) by major institutional investors in South Korea decreased by $42.37 billion over one year to $365.29 billion last year.

The decline in foreign currency securities investment amounts by institutional investors is interpreted as being influenced by valuation losses caused by increased instability in the international financial markets last year.

In 2021, the balance of foreign currency securities investments exceeded $400 billion, reaching an all-time high. At that time, valuation gains from rising stock prices in major countries such as the United States and Europe, along with expanded new investments, significantly increased the balance of foreign stock investments.

Last year, the investment balances of asset management companies (-$25.4 billion) and insurance companies (-$17.33 billion), which have relatively large investment scales, decreased significantly, while foreign exchange banks increased by $4.76 billion due to factors such as an increase in residents' foreign currency deposits.

By product, foreign bonds decreased by $24.3 billion, and foreign stocks decreased by $9.67 billion. Foreign currency-denominated bonds issued overseas by domestic companies, known as ‘Korean Paper,’ also decreased by $8.4 billion.

Foreign bonds decreased mainly among asset management companies (-$15.92 billion) and insurance companies (-$12.41 billion) due to valuation losses caused by rising interest rates in major countries.

Foreign stocks decreased mainly among asset management companies (-$7.94 billion) due to valuation losses from falling stock prices in major countries and reduced new investments. Last year’s year-on-year stock price changes in major countries were the United States (Dow) -8.8%, Europe (EuroStoxx50) -11.7%, and Japan (Nikkei225) -9.4%.

Korean Paper also saw a decrease in investment balances across all institutional investors due to factors such as rising interest rates in major countries.

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