On the 14th, Bank of Korea (BOK) governor nominee Shin Hyun-song said he views private overseas asset investment—such as so-called seohak Les Fourmis (domestic investors who invest in overseas stocks)—positively.
In a written response submitted to the National Assembly that day, Shin answered a question asking whether private overseas asset investment is closer to a "drain on national wealth" or an "expansion of an external safety valve," saying, "Fundamentally, I place more weight on the positive aspect that private overseas asset investment serves as an 'external safety valve.'"
Shin added, "This is because there is an aspect that enhances the external soundness of our economy, such as improving the external position when the exchange rate rises." The point is that when the won-dollar exchange rate rises, the value of overseas asset held by domestic residents also goes up, thereby expanding net external asset.
This response appears to reflect awareness of the criticism that arose after Rhee Chang-yong, the BOK governor, in November last year cited young people's overseas stock investments as a factor behind the rise in the won-dollar exchange rate. At the time, after the the Bank of Korea's monetary policy committee meeting, Rhee told reporters, "The reason the (won-dollar rate is) approaching 1,500 won now is not the Korea-U.S. interest rate gap but simply overseas stock (investment)." He continued, "When I asked, because young people are investing so much overseas, 'Why are you investing so much overseas?' the answer was 'Because it's cool.'" For this reason, he drew public ire from individual investors by appearing to blame seohak Les Fourmis for the high exchange rate while overlooking the lack of investment appeal in the domestic stock market.
Shin cited the gap in long-term stock return rates at home and abroad as one of the causes pushing up the won-dollar exchange rate. Shin said, "If policymakers effectively respond to medium- to long-term factors behind exchange rate appreciation—such as gaps in economic growth rates, interest rate differences, and differences in long-term stock return rates at home and abroad—the exchange rate could change accordingly."
However, Shin viewed seohak Les Fourmis as having pushed up the won-dollar exchange rate to some extent in the fourth quarter of last year alone. At the time, the rate rose from the 1,400-won range to the 1,480-won range. Shin said, "The exchange rate increase in the fourth quarter was mainly due to supply-demand imbalances in dollars stemming from uncertainty over U.S.-bound investment and an increase in residents' overseas investment."