This year, South Korean investors' purchases of U.S. stocks have been slowing, data showed. It is seen as the effect of the "return-to-domestic-market account (RIA)" that is encouraging the return of overseas stock investors to the local market.
According to the Korea Securities Depository (KSD) securities information portal on Apr. 5, South Korean investors' net purchases of U.S. stocks in March totaled $1.69 billion (about 2.55 trillion won). Net purchases of U.S. stocks had reached $5 billion in January, but have been steadily decreasing, to $3.95 billion in February and further since.
The amount of U.S. stocks held in custody, a proxy for potential investment funds, is also on the decline. The U.S. stock custody balance, which was $168 billion in January, came to $164.9 billion in February and $154.2 billion in March.
Some say the decline in U.S. stock investing is due to the introduction of RIAs. An RIA is an account that grants up to a 100% deduction of capital gains tax on overseas stocks if an investor sells overseas stocks held as of Dec. 23 last year and then invests in domestic stocks for one year.
If overseas stocks are sold by May 31, investors can receive a 100% deduction of capital gains tax; by Jul. 31, 80%; and by Dec. 31, 50%. The contribution limit is 50 million won.
According to the Korea Financial Investment Association, as of the 2nd, 91,923 accounts had been opened at 23 securities firms, with a cumulative balance of 482.6 billion won.