The Bank of Korea said on the 1st that the balance of foreign-currency securities investments such as overseas stocks and bonds held by domestic institutional investors fell by $4.26 billion in the first quarter. The decline came as overseas stock prices fell and U.S. Government Bonds yields rose after the Middle East war broke out at the end of February.
According to the first-quarter trends in foreign-currency securities investments by major institutional investors released by the Bank of Korea on the day, the balance of foreign stocks held by institutional investors was $288.52 billion, down $4.01 billion from the previous quarter. Institutional investors refer to asset managers, foreign exchange banks, insurers, and securities firms. The valuation amounts were compiled based on their own accounts.
The Bank of Korea said, "As stock prices corrected due to the Middle East war, bargain-hunting inflows expanded net investment," but added, "The balance decreased as valuation losses were larger." Institutions viewed the drop in U.S. stock prices as a bargain-buying opportunity and invested, but the valuation amounts of stocks they already held fell more, reducing the overall balance. The S&P 500 index fell 4.6% in the first quarter.
Overseas bonds held by institutions stood at $182.2 billion, down $450 million from the previous quarter. As concerns about global inflation pushed up Government Bonds yields, valuation losses widened. Bond yields rise when prices fall. The yield on the U.S. 10-year Treasury, the benchmark of the international Government Bonds market, rose 0.15 percentage point from 4.17% at the end of last year to 4.32% at the end of March this year.
"Korean Paper," meaning bonds and the like issued in foreign currencies such as dollars overseas by domestic corporations and banks, stood at $32.61 billion, up $200 million from the previous quarter.