Kim, at the same time, expressed concern that private investors may be growing dangerously dependent in the Chinese stock market. (image: KobizMedia/ Korea Bizwire)
SEOUL, Nov. 2 (Korea Bizwire) – The latest report from the Korea Capital Market Institute (KCMI) revealed that the Q2 2016 balance of overseas stock investment by domestic residents was $159.3 billion, an almost four-fold increase since Q1 2009, shortly after the 2008 financial crisis.
According to the institute, the trend was largely driven by government investment (i.e. pension funds), which increased dramatically over the past decade, from 24 percent of all overseas stocks investments at the end of 2007 to 66 percent in Q2 2015.
During the same period, the amount of investment by non-bank financial institutions decreased by 42 percent.
As of June 2015, 50.7 percent of the balance went to the U.S., while 9 percent went to the Eurozone, 7.8 percent to China, and 6.2 percent to the U.K.
“Unlike American and European investors that tend to prefer the European market, Korea and Japan had a high proportion of their stock investments go to the U.S.,” said KCMI researcher Kim Han-soo. “While government investment in overseas stocks focuses on high-income, developed markets, private investors focus more on China or other emerging markets.”
Kim, at the same time, expressed concern that private investors may be growing dangerously dependent in the Chinese stock market.
According to Kim, the biggest advantage of overseas investment is that it guarantees maximized risk-adjusted profit through asset allocation.
“The effects of diversified investment are enhanced when investment risk is divided into two separate regions with minimum economic correlation,” he said. “I’m curious as to whether domestic investors are making the best use of the advantages of overseas stock investment.”
By Kevin Lee (kevinlee@koreabizwire.com)
