Bank of Korea reports sharp second-quarter fall in net external financial assets

Bank of Korea said South Korea's net external financial assets fell to $64 billion at the end of the second quarter from $753.6 billion in the first quarter, as nonresidents' portfolio investment in equities increased.

Financial liabilities rose $891.2 billion to $3.0202 trillion from the first quarter, driven by nonresidents' portfolio investment, which accounted for $859.3 billion of the increase, including $848.1 billion in equities. The Bank of Korea linked the increase to domestic equity prices: The Kospi climbed 67.8 percent during the quarter, from 5,052.5 to 8,476.5.

Assets held abroad by Korean residents rose $201.7 billion to $3.0843 trillion. Portfolio investment increased $142.7 billion, led by a $146.2 billion rise in equity securities. Other investment rose $31.8 billion, with trade credit and cash and deposits increasing $16.1 billion and $15.1 billion, respectively, while direct investment gained $20.8 billion.

Separate external claims and debt figures showed net external claims, measured as external claims less external debt, rose $2.3 billion to $367.8 billion. External claims increased $40.7 billion to $1.1806 trillion, while external debt rose $38.4 billion to $812.8 billion.

Short-term external debt was equal to 46.5 percent of foreign-exchange reserves and 24.4 percent of total external debt at the end of the quarter.