By Kang Seung-woo
Amid the worsening European debt crisis, Korean investment in overseas securities plunged the most for a third quarter since the global financial crisis, the central bank said Tuesday.
According to the Bank of Korea (BOK), institutional investments in foreign stocks, bonds and Korean paper recorded an outstanding $57.8 billion as of the end of September this year, down $11.14 billion from the end of June.
Korean paper refers to foreign-currency denominated securities issued abroad by the Korean government, financial institutions or companies.
The third-quarter reading hit the lowest point since the first quarter of 2009, when investment fell to $51.86 billion and the fall in the July-to-September period posted the largest decline since a $18.06 billion slide in the fourth quarter of 2008, when Asia’s fourth-largest economy was plagued by the global financial crisis.
The central bank analyzed that the ongoing European sovereign debt fiasco shattered stock prices in invested countries, bringing down the value of shareholding held by local institutional investors.
Major economies have suffered big losses through stock market volatility, as China led the pack with minus 29.1 percent, followed by the European Union’s minus 23.5 percent, Hong Kong’s minus 21.5 percent and Brazil’s minus 16.2 percent. The United States also remained in negative territory with minus 12.1 percent.
“Amid growing uncertainties in global financial markets, Korean institutional investment in overseas securities has been on a steady decline,” said a BOK official.
The data comes as renewed concerns over global uncertainties are brewing after Moody’s Investors Service warned that deterioration in the eurozone debt crisis is threatening the credit ratings of countries in the region. Fitch Ratings has downgraded its credit outlook on the United States to negative from positive.
By institution, asset management companies, which usually invest in overseas stocks, saw their investments fall by $10.1 billion from three months earlier, followed by $530 million from foreign exchange banks, $390 million from insurers and $$120 million from brokerages, the BOK said.
In addition, investments in foreign stocks declined $10.46 billion quarter-on-quarter to $27.1 billion as of the end of September and those in overseas bonds fell $460 million to $14.12 billion.
Meanwhile, the nation’s overseas investments are losing momentum, as Koreans are taking back their investments in foreign securities and bonds on fears over external uncertainties.
According to the latest figures by the BOK, local residents’ investment in overseas securities marked a net inflow of $2.63 billion in the third quarter following a third consecutive quarterly net outflow, the largest net inflow of investment in foreign stocks and bonds since $2.85 billion in the first quarter of 2009.
The central bank said earlier this month that local investors appear to have sold riskier stocks more than bonds due to lingering fears over global market instability.