Foreign investment in S. Korea rises at fastest clip in Q2 on stock rally

South Korea witnessed a record surge in foreign investment during the second quarter, propelled by a significant rally in the local stock market, according to central bank data released on Thursday. The outstanding amount of foreign investment reached a staggering US$3.02 trillion as of the end of June, marking a $891.2 billion increase from the previous quarter.

This marked the first time the total surpassed the $3 trillion threshold and represented the largest on-quarter increase since 1994, when the Bank of Korea began tracking such data.

Foreign securities investment soared $859.3 billion to $2.33 trillion, while direct investment climbed $400 million to $321.1 billion. The sharp rise in domestic stock prices contributed to the heightened valuation of foreign investors' holdings in Korean equities. The Korea Composite Stock Price Index (KOSPI) surged 67.8 percent during the quarter.

Meanwhile, the country's external financial assets, comprising Korean residents' investments abroad, increased $201.7 billion won to a record $3.08 trillion as of the end of June – also a record high. This marked the sharpest increase ever recorded. Of this, residents' securities investments rose $142.7 billion on-quarter to $1.38 trillion, driven by a rally in the U.S. stock market.

Direct investment grew $20.8 billion to $872.5 billion from the prior quarter, with the Dow Jones Industrial Average up 12.9 percent and the tech-heavy Nasdaq composite jumping 21.4 percent. However, this surge in external financial liabilities exceeded the rise in external financial assets, causing the country's net international investment position to decline $89.5 billion on-year to $64 billion, the lowest level since the third quarter of 2014.