Koreans go shopping for foreign stocks
IT shares were the investors’ favorite. U.S. retail giant Amazon took the honor as the most popular foreign investment destination. Chinese tech giant Tencent Holdings came in second.
On Thursday, the Korea Securities Depository released a report on the size of securities held by Koreans in foreign currencies during the first quarter of 2018. The Korea Securities Depository, or the KSD, deposits and settles foreign and domestic bonds and securities of virtually all Korean individual and private investors.
According to the KSD, Amazon held the most Korean investment at $573 million (620 billion won). This is a huge change from last year, when the retailer didn’t even make it into the top 10.
Tencent, listed in Hong Kong, claimed the number two spot at $452 million. Japan’s Nippon Steel and Sumitomo Metal held $344 million in Korean investment in third place, declining in both rank and investment size compared to last year when it held $548 million at second place.
At fourth place was Chinese retail giant Alibaba Group. In the first quarter, Korean investors held $298 million worth of Alibaba stocks listed on the New York Stock Exchange.
In fifth place was Line, a Japanese subsidiary of Korean IT giant Naver, followed by Nvidia, a tech firm headed by a Taiwanese-American that develops gaming and automotive chips.
China’s Ping An Insurance and Jiangsu Hengrui Medicine took seventh and eighth. Alphabet, which owns Google, landed at ninth.
The investment trends align with industry experts’ outlook on the market. On Wednesday, Shinhan Investment asked 100 of its private bankers to recommend foreign stocks for investment. Amazon was the most popular choice, recommended by 18 bankers, while Tencent came in second with 10 recommendations. Nvidia was the third most popular with eight recommendations. Vingroup, a Vietnamese conglomerate that deals in real estate, heath care and education, came in fourth with seven recommendations. Alibaba and Jiangsu Hengrui Medicine tied at fifth with six recommendations.
Korean investors’ love for foreign stocks has become increasingly apparent since last year. While the value of stocks held in foreign currencies declined 0.2 percent on-year in 2016, it jumped an astounding 60.5 percent in 2017 on-year.
The upward trend is continuing this year. In the first quarter, Koreans held $11.7 billion worth of stocks in foreign currencies, a 50 percent increase on-year. During the same period, bonds held in foreign currencies - totaled at $24.7 billion - increased much more moderately at 4.7 percent.
“Unlike the past, when investing in funds of specific countries was popular, investors are now preferring individual stocks with promising potential,” said Moon Yun-jung of Shinhan Investment. “Wealthy people now trade stocks to hold them long-term or hand them down to their children, rather than to see quick profits.”
By country, Koreans favored investment in the United States and China. Compared to the first quarter last year, Koreans held 47.3 percent more American securities, including stocks and bonds, and 118 percent more Chinese securities.
The size of Japanese and European securities increased modestly, rising 15.9 percent and 7.7 percent each. The size of Hong Kong securities held by Koreans decreased by 19.6 percent.
Vietnamese securities holdings leaped up 550 percent.
“As Korean securities firms began participating in IPOs [initial public offerings], more Koreans are investing in new Vietnamese stocks,” said Koh Byung-geun, who works at the KSD in international deposits and settlement. “Also, since it became possible for direct investment into Chinese stocks via the Shanghai- and Shenzhen-Hong Kong Stock Connect, Koreans are investing more in Chinese companies.”
Industry experts warn, however, that foreign investment could be tricky business.
“Investors have to remember that the upper and lower price limits, trading unit, service fees and settlement dates vary by country,“ said Baek Chan-gyu, a researcher specializing in overseas stocks at the Korea Investment & Securities. “Moreover, they have to think about the currency exchange fees, which will have a large effect on their investment profits.”
“Taxes are also important. Even if you are a minority shareholder, unlike for domestic stocks, you will most likely have to pay transfer income tax for the capital gains of foreign stocks,” Baek added.
BY CHO HYUN-SOOK AND SHIM SAE-ROM [email@example.com]