By Kim Jae-kyoung
Staff Reporter
Foreign investment in South Korea declined sharply last year due to the local stock market crash triggered by the global financial crisis, according to the Bank of Korea (BOK).
In its report on international investment Thursday, the central bank said that the outstanding balance of foreign investment in Korea reached $601.8 billion at the end of 2008, down 27.5 percent or $224.4 billion from the previous year. The amount peaked at a record high of $826.3 billion at the end of 2007.
Foreign investment includes ― but is not limited to ― direct investment, portfolio investment (investment in securities, such as stocks and bonds), loans, and deposits.
By investment type, foreign portfolio investment stood at $252.3 billion at the end of last year, down 44.8 percent from the preceding year. Investment from the United States marked the biggest drop at 56 percent. Foreign direct investment also dropped by 30.1 percent to $85.3 billion won during the same period.
``Last year, foreign investors suffered from huge paper losses from investment in local stocks and bonds due to the stock market collapse and the won's depreciation,'' a BOK economist said.
In the meantime, Korea's investment in overseas securities fell for the first time in 2008 as the global financial turmoil shook major stock markets, including those in the United States and Japan.
Korean investment in overseas stocks and bonds reached $75.4 billion as of the end of 2008, down 52.5 percent from the previous year. It was the first decrease since 2002, when the central bank began to compile related data.
Total overseas investment by Korea also posted the first fall since 2002, falling 13.2 percent to $290.3 billion year-on-year.
Global equity markets went through a tumultuous period last year, battered by the collapse of U.S. investment banks and the global economic recession. The Dow Jones industrial average declined 33.8 percent in 2008, while China's Shanghai Composite Index plunged 65.4 percent.