Koreans log $5.7 bn loss in Q3 from overseas stock investments

South Korean investors suffered a $5.7 billion loss in the third quarter from overseas stock investments on weak foreign shares. Individual investors, which had enjoyed hefty profits from US technology stocks, reported their first quarterly deficit this year.

The balance of foreign equity securities held by South Korean institutional and retail investors grew $7.3 billion to $552.7 billion as of end-September from the previous three months, according to the international investment position data from the Bank of Korea on Nov. 18.

The growth fell short of a $13 billion purchase of overseas stocks and funds in the July-September period, indicating they lost $5.7 billion in the valuation of foreign equity securities during the quarter. That came as overseas stock markets skidded. In the third quarter, the Hang Seng China Enterprises Index dropped 18.2%, while the Dow Jones Industrial Average and the Nasdaq fell 1.9% and 0.4%, respectively.

South Korean investors enjoyed $31.8 billion and $10.3 billion of profits on valuations in the second and the first quarter, respectively, after reaping $55.8 billion in 2020.

SUSTAINED LOVE FOR US TECH STOCKS

In the third quarter, South Korean investors’ top pick among foreign stocks was Google parent Alphabet Inc., with a net purchase of $342.7 million, according to the Korea Securities Depository. ProShares UltraPro QQQ, an exchange-traded fund (ETF) that corresponds to three times the daily performance of the Nasdaq-100 Index, came second with $300.8 million, followed by Microsoft Corp. with $244.3 million and Amazon.com with $220.2 million. They also bought a net $218.4 million in Hang Seng China Enterprises Index ETF.

South Korean investors also suffered a hefty loss from overseas bond investment in the third quarter given higher debt yields amid a tighter US monetary policy. The balance of foreign bonds including US Treasuries held by South Koreans rose $3.5 billion to $336.6 billion as of end-September, the Bank of Korea data showed.

They bought $17.1 billion in overseas bonds in the third quarter but lost $13.6 billion in valuation during the period.

The US Federal Reserve earlier this month decided to start scaling back asset purchases.

Meanwhile, South Korea’s net external assets in debt instruments increased $7.7 billion to $464.6 billion as of the end-September over the quarter, the Bank of Korea said. The ratio of short-term foreign debt to foreign reserves stood at 35.5 percent at the end of September, down 3.7 percentage points from a quarter earlier.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Jongwoo Cheon edited this article.