This year, the National Pension Service has increased its overseas stock investments more aggressively than ‘Seohak ants, Korean retail investors buying foreign stocks’. While criticism arose that the surge in dollar demand from Seohak ants, Korean retail investors buying foreign stocks, had driven up the exchange rate against the won, a counterargument emerges that the National Pension Service’s dollar absorption for investments has been even greater.
According to the Bank of Korea, the general government’s overseas stock investments from January to September this year totaled $24.514 billion, a 92% increase from the same period last year ($12.785 billion). During the same period, overseas stock investments by non-financial corporations and others rose 74% from $9.561 billion to $16.625 billion.
The Bank of Korea explains that the general government typically refers to the National Pension Service, while non-financial corporations and others can be interpreted as individual investors. Ultimately, the National Pension Service nearly doubled its overseas stock investment scale compared to last year through the third quarter. In terms of investment size, the National Pension Service’s overseas stock investments through the third quarter this year were 1.5 times those of individual investors, widening the gap from 1.3 times during the same period last year.
This suggests that the won-dollar exchange rate could fluctuate as the National Pension Service increases its conversion of won to dollars for overseas investments. This context is read as the background for the Ministry of Economy and Finance to launch a four-party consultative body with the National Pension Service, the Bank of Korea, and the Ministry of Health and Welfare.
However, it is difficult to dismiss the argument that the recent surge in activity by Seohak ants, Korean retail investors buying foreign stocks, has also stimulated the exchange rate. According to the Korea Securities Depository, individual investors net-purchased $12.337 billion worth of overseas stocks in October and November alone. If this figure is simply added to the non-financial corporations and others’ overseas stock investment scale announced by the Bank of Korea, individual investors’ overseas stock investments from January to November this year total $28.962 billion—nearly three times the scale of the same period last year ($9.99 billion). Coincidentally, the period when the exchange rate surged sharply was October to November.
