Investments overseas saw a seven-year surge in 2014

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Investments overseas saw a seven-year surge in 2014

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Institutional investors’ investments in foreign bonds and securities last year saw the biggest increase in seven years largely due to the low interest rate and a growing preference for safer assets.

According to the Bank of Korea on Thursday, institutional investors including insurers, brokerage firms and asset management companies were invested in $95.4 billion worth of foreign bonds and securities as of last year. That was a $20.9 billion increase from the previous year, the sharpest increase in seven years. In 2007, such investments grew $61.1 billion.

Those investments dipped in 2008 because of the global financial meltdown that started with the bankruptcy of Lehman Brothers. That year the outstanding value of institutional investments in foreign bonds and securities fell $62.5 billion from the year before.

The BOK report showed that investments in foreign securities largely grew thanks to the abundance of foreign currency liquidity in the market contributed by the ongoing current account surpluses. Additionally, as the central bank lowered the key interest rate to an all-time low of 2 percent, institutional investors have been increasing their investments outside the local market.

A preference for safe assets resulted in larger demand for foreign bonds.

In fact, institutional investors’ investments in foreign bonds grew 47.9 percent year-on-year to nearly $35 billion.

Among the institutional investors, insurers and asset management companies were the most aggressive. Insurers added $12.7 billion worth of foreign bonds and securities investment last year to total $39.2 billion. Asset management companies by the end of last year added $6.1 billion worth of fresh investment on foreign bonds and securities.

by LEE HO-JEONG [lee.hojeong@joongang.co.kr]

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