Korean retail investors turn to oversea assets as local markets lose appeal

2019.04.04 14:46:11

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South Korean retail investors have turned eyes to offshore amid lackluster stock and real estate markets and low-interest rate environment.

According to Samsung Securities Co. on Thursday, its customers made a combined 950 billion won ($836.1 million) in new investments overseas in the first quarter this year, almost doubling from the entire new overseas investment made in last year. The total investments in foreign assets amounted to 1.8 trillion won during the January to March period, the company said.

Korean investors placed around 510 billion won in interest-paying overseas assets such as dollar-denominated bonds, accounting for 54 percent of the entire new investments. The share increased more than four times compared to last year when investment in interest-paying assets had took up 11.5 percent of total new overseas investments.

Samsung Securities explained that Korean investors are in search for safe but high returns in interest-paying investments in foreign countries as the gap between the U.S. and Korea’s benchmark interest rate is expected to be maintained for the time being. The Korean central bank raised its policy rate only twice over the past two years, including the latest hike to 1.75 percent in November. The U.S. Federal Reserve is also expected to hold off its rate hiking pace and keep its benchmark rate at 2.25 percent to 2.5 percent.

Korean investors made the largest new investment in overseas trusts including interest-paying assets at 39 percent, followed by equity-linked securities (ELS) and derivatives-linked securities (DLS) at 21 percent, overseas bonds 15 percent and overseas stocks 13 percent.

Cumulative assets held in overseas accounts by Samsung Securities clients expanded to 10.6 trillion won at the end of March. Average return rate on overseas investments reached 9.43 percent, almost doubling from 4.88 percent gain in the nation’s main Kospi market during the January to March period.

As of 2:28 p.m. on Thursday, the Kospi market rose 0.10 percent to 2,205.55. It fell more than 9 percent compared to a year ago when it had reached 2,429.58 points on April 6, 2018. The drop was largely driven by retail investors who net sold 4.47 trillion won worth local stocks from the beginning of the year to Wednesday.

By Jung Seung-hwan and Choi Mira

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