KOSPI Surge Slashes South Korea’s Net International Investment Position
As the domestic stock market surged by over 70% during the second quarter, South Korea’s net international investment position plunged by $689.5 billion in a single quarter. This is the largest decline in history, shrinking by nearly $700 billion in one quarter since relevant statistics were compile
South Korea's net international investment position experienced a historic decline of $689.5 billion in a single quarter due to a surge in domestic stock prices, particularly in the semiconductor industry. This marks the largest decrease since 1994 and the lowest level since the net international investment position first turned positive in 2014.
The Bank of Korea attributes this to a statistical "illusion and paradox" rather than a deterioration of external soundness. While the domestic stock market surged by over 70%, the rise in external financial liabilities, driven by foreign investors' holdings of South Korean stocks, far outpaced the increase in external financial assets.
The Bank of Korea emphasizes that external financial liabilities, which include domestic stock valuations, are distinct from traditional external debt that requires repayment. The valuation effect of the stock price surge caused a $977.5 billion decrease in net assets, overwhelming the $155.9 billion increase from the export surplus.
Despite a notable rise in short-term external debt to reserve assets, the Bank of Korea suggests this does not necessarily indicate worsening foreign exchange liquidity, as the funds remain in domestic won deposits or accounts payable.
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
