By Kim Yoo-chul
The Bank of Korea (BOK) is considering expanding its investment into equity assets amid efforts to search for higher yields in a low-inflation and low-growth environment.
"The BOK is searching for better yields by increasing its exposure to non-traditional assets such as equities," the bank announced, Monday, adding challenging market conditions have prompted rethinking how it invests its foreign reserves.
An official said the bank was considering letting Korean asset management firms handle projects for equity asset investment using the bank's foreign exchange reserves.
Last December, the bank chose four domestic securities firms _ Mirae Asset Daewoo Securities, NH Investment and Securities, Samsung Securities and Korea Investment and Securities _ as its partners for managing foreign bonds that the bank has invested in.
But it's still unsure whether the BOK will allow all or some of these securities firms to handle part of its reserve portfolio.
"Because the bank is apparently taking on more risk by broadening its investment tools, more effective communication and transparency in management would be considered the top priority," said an analyst at NH Investment and Securities asking not to be named.
The bank official declined to elaborate further; however, the updated plan to add riskier assets to its foreign reserves portfolio comes at a time when other central banks have been looking at non-traditional assets as part of diversification amid swelling foreign exchange reserves.
By 2016, the portion of foreign exchange reserves that the BOK had invested in equity assets was slightly below 8 percent of its total foreign holdings, according to the bank. Foreign asset managers were handling the management of the bank's equity portfolio.
The bank said Monday that the country's total foreign exchange reserves reached a record-high $395.75 billion in January this year, up $6.49 billion from the previous month.
But economists say the bank is likely to gradually increase the portion of foreign exchange holdings in the short-term, alongside highly liquid assets and secure foreign government bonds that the bank can always realize in a "crisis."
Central banks hold their official reserves of foreign exchange, and do so as a "precaution" _ in case they need to step in the foreign exchange market to stabilize exchange rates, or to provide foreign currency liquidity to local financial institutions in cases of financial difficulties.
The Bank of Korea (BOK) is considering expanding its investment into equity assets amid efforts to search for higher yields in a low-inflation and low-growth environment.
"The BOK is searching for better yields by increasing its exposure to non-traditional assets such as equities," the bank announced, Monday, adding challenging market conditions have prompted rethinking how it invests its foreign reserves.
An official said the bank was considering letting Korean asset management firms handle projects for equity asset investment using the bank's foreign exchange reserves.
Last December, the bank chose four domestic securities firms _ Mirae Asset Daewoo Securities, NH Investment and Securities, Samsung Securities and Korea Investment and Securities _ as its partners for managing foreign bonds that the bank has invested in.
But it's still unsure whether the BOK will allow all or some of these securities firms to handle part of its reserve portfolio.
"Because the bank is apparently taking on more risk by broadening its investment tools, more effective communication and transparency in management would be considered the top priority," said an analyst at NH Investment and Securities asking not to be named.
The bank official declined to elaborate further; however, the updated plan to add riskier assets to its foreign reserves portfolio comes at a time when other central banks have been looking at non-traditional assets as part of diversification amid swelling foreign exchange reserves.
By 2016, the portion of foreign exchange reserves that the BOK had invested in equity assets was slightly below 8 percent of its total foreign holdings, according to the bank. Foreign asset managers were handling the management of the bank's equity portfolio.
The bank said Monday that the country's total foreign exchange reserves reached a record-high $395.75 billion in January this year, up $6.49 billion from the previous month.
But economists say the bank is likely to gradually increase the portion of foreign exchange holdings in the short-term, alongside highly liquid assets and secure foreign government bonds that the bank can always realize in a "crisis."
Central banks hold their official reserves of foreign exchange, and do so as a "precaution" _ in case they need to step in the foreign exchange market to stabilize exchange rates, or to provide foreign currency liquidity to local financial institutions in cases of financial difficulties.
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