Overseas buying shrinks

Direct transactions of overseas stocks that Korean investors made in the first half turned out to have shrunk sharply due to widening uncertainties in the global market, especially in China.

The problem is that passive investments are likely to continue in the second half of the year, especially with global economic expansion likely to further retreat.

According to the Korea Securities Depository, Korean investors bought and sold overseas stocks in the first six months of this year worth $6.24 billion. That’s nearly a 16 percent drop from $7.42 billion a year ago and 7.7 percent from the end of last year.

Compared to a year ago, investment in Hong Kong saw the sharpest drop as it plummeted 57.1 percent to $1 billion. Japan followed as stock transactions by Korean investors fell 32.6 percent to $2.62 billion and those by U.S. investors were down 22.4 percent to $3 billion.

Investment in Europe rose 5.1 percent to $1.2 billion while investment in China surged 32.5 percent to $55,000.

However, when compared to six months ago, investments in China reported the sharpest decline, plunging 70 percent, followed by Hong Kong’s 56.6 percent and Japan’s 26.6 percent.

“In the beginning of the year, there have been deepening concerns over China’s hard landing, which affected other global markets negatively, including the United States and Europe,” said Hwang Se-woon, senior researcher at the Korea Securities Depository. “As a result, Korean investors have become less aggressive in their overseas stock investments.”

In fact, China’s economic growth in the second quarter grew 6.7 percent. Although it is slightly improved from the earlier forecast of 6.6 percent growth, it is still considerably lower than even last year.

The current sentiment is unlikely to improve in the second half, with many market experts still expecting a slight drop on China’s economy.

Major investment banks on average expect a 6.5 percent growth in both the third and fourth quarters, according to a report released on Friday by the Korea Center for International Finance.

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