Global Stock Decline and Strong Dollar Cause Korea's External Financial Assets to Decrease for the First Time in 20 Years

Largest Decrease in External Financial Liabilities Since 2008

[Image source=Yonhap News]

Last year, as global stock prices fell and the 'strong dollar' phenomenon continued, South Korea's external financial assets decreased for the first time since the statistics were compiled in 2002.

According to the '2022 Regional and Currency International Investment Position (Provisional)' released by the Bank of Korea on the 27th, as of the end of last year, South Korea's external financial assets excluding reserve assets stood at $1.7456 trillion, down $16.2 billion from the end of 2021.

External financial assets refer to the amount Koreans have invested in foreign financial products or the amount companies have directly invested overseas.

Reserve assets ($423.2 billion) were excluded from the balance in this statistic, in accordance with international conventions that do not disclose reserve asset management details in the international investment position.

By investment region, the largest investment was in the United States at $683.3 billion (39.1%), followed by Southeast Asia at $244.8 billion (14.0%), and the European Union (EU) at $230.6 billion (13.2%).

Compared to the end of the previous year, the investment balance in Southeast Asia increased by $19.9 billion mainly due to direct investment, but investment balances in China (-$14.6 billion), the EU (-$12.6 billion), and the United States (-$1.9 billion) decreased. The increase in Southeast Asia's investment balance was influenced by increased alternative investments in Singapore and Hong Kong, a rise in corporate acquisitions, and local expansions of service industries such as Yanolja. Yoo Bok-geun, head of the Foreign Investment Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "The decrease in investment balance in China is the largest ever," adding, "This is due to a reduction in trade credit following a decline in exports to China and a drop in the Chinese stock market."

Breaking down the investment balance in the United States by type, securities investment was the largest at $423 billion, followed by direct investment at $174.5 billion and other investments at $79.1 billion.

The external financial liabilities balance, which refers to the amount foreigners or companies have invested in Korean financial products or direct investments, stood at $1.3974 trillion at the end of last year, a decrease of $142.3 billion compared to the end of the previous year. This decline in external financial liabilities is the largest since 2008 (-$176.3 billion).

By investment region, the United States was the largest at $324.5 billion (23.2%), followed by Southeast Asia at $313.2 billion (22.4%), and the EU at $228.4 billion (16.3%). Compared to the end of the previous year, domestic stock prices fell and the Korean won depreciated against the US dollar, causing investment balances in all regions to decrease.

By investment type, direct investment was largest in the EU at $71.3 billion (26.2%), securities investment was highest in the United States at $246.5 billion (30.3%), and other investments were largest in Southeast Asia at $84.7 billion (34.5%).

At the end of last year, South Korea's external financial assets by currency were led by US dollar-denominated financial assets at $1.0213 trillion (58.5%), followed by the euro at $165.4 billion (9.5%) and the Chinese yuan at $110.6 billion (6.3%). Compared to the end of the previous year, investment balances in US dollars increased by $5.7 billion, while those in yuan (-$13.1 billion), euros (-$9.5 billion), and yen (-$7.8 billion) decreased.

Among external financial liabilities, Korean won-denominated financial liabilities were the largest at $871.3 billion (62.4%), followed by US dollars at $405.3 billion (29.0%) and euros at $41 billion (2.9%).

Team leader Yoo said, "Compared to the end of the previous year, domestic stock prices fell and the won depreciated against the US dollar, resulting in a $200 billion decrease in won-denominated liabilities."

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