The net external financial assets of the nation decreased by nearly $700 billion. This decrease is attributed to the stock market boom in the second quarter. According to the Bank of Korea on July 7, the net external financial assets, also referred to as ‘pure external financial assets,’ totaled $649.1 billion as of the end of June. This represents a decrease of $677.1 billion from the end of March. The term ‘net external financial assets’ refers to the difference between external financial assets and external financial liabilities. It is calculated by subtracting the total amount of money that the nation owes to foreigners, such as foreign exchange reserves, from the total amount of money that foreigners owe to the nation, including direct and indirect investments. At the end of June, external financial assets amounted to $1.98 trillion, a decrease of $350.8 billion from the end of March. External financial liabilities also decreased by $326.3 billion to $1.33 trillion during the same period. The decrease in external financial assets was mainly due to a $476.6 billion decrease in portfolio investment, which includes stock and bond investments. The decline in the stock market, as represented by the KOSPI, which fell by 12.2% from 2,754.18 at the end of March to 2,415.38 at the end of June, affected this decrease. In contrast, direct investment increased by $89.7 billion. The decrease in external financial liabilities was driven by a $364.7 billion decrease in direct investment. The won-dollar exchange rate, which averaged 1,250.1 won per dollar in the second quarter, was 6.9 won lower than the average of 1,256.0 won per dollar in the first quarter. The Bank of Korea stated that "the decrease in net external financial assets is due to the decline in stock prices and the appreciation of the dollar."
A significant decline in the "대외금융자산" (Foreign Direct Investment Assets) in South Korea occurred during the second quarter, with the value dropping close to $7 trillion. According to the preliminary 'Second Quarter International Investment Balance Sheet' released by the Korea Bank on the 20th, the difference between foreign direct investment assets and foreign direct investment liabilities, which is the '대외금융자산,' was $640 billion as of June's end.
This figure was lower than the previous quarter's $7,536 billion, marking an 4.6-fold increase from the previous record-breaking decrease of $1,515 billion in the fourth quarter of the previous year. The unprecedented decline in the '대외금융자산' was primarily due to more domestic investors engaging in foreign investments than foreign investors in domestic investments, leading to a significant increase in foreign investors' valuation of domestic stocks during the second quarter.
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