🚨 Foreign Assets Hit Record High
Today Korean Economic News for Beginners | 2025.11.20
0️⃣ Korean Retail Investors' Overseas Investment Weakens Won
📌 Foreign Assets $2.7976 Trillion Record High...Net Asset Increase Pushes Up Exchange Rate
💬 According to the Bank of Korea, Korea's foreign financial assets reached a record high of $2.7976 trillion. Domestic investors actively invested in overseas stocks and direct investments, greatly increasing foreign financial assets. However, the increase in foreign investment in Korea was relatively small. As a result, net foreign financial assets surged, becoming a major factor in the rise of the won-dollar exchange rate (weakening of the won). In particular, the investment fever in US stocks by individual investors called 'Westward Ants' continued, greatly increasing dollar demand, becoming a structural factor increasing exchange rate volatility. Experts point out that "we have entered an era where the flow of domestic investors' overseas investment directly affects the exchange rate, unlike in the past" and "individual investors' choices are also affecting the macroeconomy."
1️⃣ Easy to Understand
Recently, Korean people have invested a huge amount of money overseas, especially in US stocks, and Korea's 'foreign assets' have grown to a record high. However, the money foreigners invest in Korea hasn't grown as fast, so ultimately more money is leaving Korea for overseas, and this is becoming a major cause of the won's decline (exchange rate rise).
First, let's understand what foreign financial assets are. Foreign financial assets mean all assets that a country's citizens or companies own overseas. This includes overseas stocks, bonds, real estate, and direct investments like overseas factories or branches. According to the Bank of Korea, our country's foreign financial assets amount to $2.7976 trillion, about 3,900 trillion won in Korean money. This is a record high.
Why did it increase so much? The biggest reason is that domestic investors, especially individual investors, greatly increased their overseas stock investments. Have you heard the term 'Westward Ants'? This is what we call Korean individual investors who invest in the US stock market. After COVID-19, as the stock prices of US big tech companies like Tesla, Nvidia, and Apple skyrocketed, many Koreans started investing in US stocks.
Let me explain with an example. Suppose Mr. A invested 10 million won in Samsung Electronics stock three years ago. The return would have been about 10% during that time. But if he had invested in Nvidia during the same period? He would have made a return of over 300%. As these experiences accumulated, more people turned their eyes to overseas investment.
But here's an important point. To buy US stocks, we need to exchange won for dollars. For example, if Mr. A wants to buy $10,000 worth of Tesla stock, he needs to exchange won for dollars at a bank. If the exchange rate is 1,400 won, he needs 14 million won. When many people buy overseas stocks like this, demand for dollars increases, and the dollar price (exchange rate) rises.
What about foreigners? When foreigners buy Korean stocks or invest in Korea, they need to exchange dollars for won. This increases dollar supply and lowers the exchange rate. But recently, foreigners' investment in Korea hasn't increased much. Some have even sold Korean stocks and left.
What happened as a result? There's a lot of money going out from Korea to overseas (dollar demand), but little money coming into Korea from overseas (dollar supply), so the dollar price rises. This is one of the main reasons why the won-dollar exchange rate recently exceeded 1,450 won.
Here, the concept of 'net foreign financial assets' is important. This is the value obtained by subtracting the amount foreigners invested in Korea from the assets our country holds overseas. Simply put, it's an indicator showing how much more we're investing overseas.
For example, if Korean people invested 100 trillion won overseas and foreigners invested 70 trillion won in Korea, the net foreign financial assets would be 30 trillion won. A large number means a lot of money is flowing net outward from Korea.
Recently, these net foreign financial assets have increased greatly. Koreans are buying US stocks diligently, but foreigners aren't buying many Korean stocks, so the gap has widened. If this situation continues, it leads to continuous dollar demand increase, and exchange rate upward pressure grows.
Why do foreigners buy fewer Korean stocks? There are several reasons. First, there's a phenomenon called 'Korea Discount'. This means Korean companies are valued lower compared to their performance. Even when Samsung Electronics posts good results, its stock price is often lower than similar US companies. Second, there are geopolitical instability factors like North Korea risk. Third, there's an assessment that corporate governance and dividend policies are not as investor-friendly compared to developed countries.
How does this situation affect our daily lives? When the exchange rate rises, the first thing we feel is travel expenses abroad. If you could exchange about 700 dollars for 1 million won when traveling to the US last year, now you can only get 690 dollars. The difference of 10 dollars may seem small, but the more travel expenses you have, the bigger the difference.
Import prices also rise. Everything from bananas and oranges we buy at the mart to luxury imports and imported cars can all increase in price. This is because importers pay for goods in dollars, and when the exchange rate rises, they need more won to buy the same goods.
Energy like oil and natural gas is also mostly imported, and these are also paid in dollars. When the exchange rate rises, oil companies' costs increase, and eventually gas station prices can also rise. This leads to inflation and increases our living cost burden.
On the other hand, there are advantages for export companies. Suppose Samsung Electronics exports a smartphone for $1,000. When the exchange rate is 1,300 won, they get 1.3 million won in sales, but when it becomes 1,450 won, they get 1.45 million won. They earn 150,000 won more selling the same product.
However, the negative effects may be greater in the long term. If the exchange rate keeps rising, import prices rise, increasing overall inflationary pressure, and this reduces real purchasing power. Also, companies with foreign currency debt face increased repayment burden.
A bigger problem is that this trend may become structurally fixed. People who have experienced overseas stock investment once don't easily return to domestic investment. This is because they've experienced the diversity and growth potential of the US market. The overseas investment of Westward Ants is likely to continue in the future, and this will act as continuous dollar demand and exchange rate upward pressure.
Ultimately, individual investors' overseas investment choices have now gone beyond the dimension of simple personal financial planning and entered an era where they directly affect the entire country's foreign exchange market and exchange rate.
2️⃣ Economic Terms
📕 Foreign Financial Assets
Foreign financial assets mean all financial assets that a country's citizens and companies own overseas.
- This includes overseas stocks, bonds, deposits, real estate, and direct investments (overseas factories, branches).
- Korea's foreign financial assets reached a record high of $2.7976 trillion.
- A large number means domestic capital's overseas investment is active.
📕 Net Foreign Financial Assets
Net foreign financial assets are the net amount obtained by subtracting the amount foreigners invested domestically from the assets a country holds overseas.
- If this value is positive, it means we've invested more money overseas than foreigners have invested in Korea.
- An increase in net foreign financial assets means net capital outflow, creating exchange rate upward pressure through increased dollar demand.
- It can act as a safety net during a foreign exchange crisis, but excessive increase may mean decreased domestic investment.
📕 Exchange Rate (Won-Dollar Exchange Rate)
The exchange rate is the exchange ratio between one country's currency and another country's currency.
- A won-dollar exchange rate of 1,450 won means you need 1,450 won to buy 1 dollar.
- When the exchange rate rises (e.g., 1,400 won → 1,450 won), it means the won's value falls and the dollar's value rises.
- When dollar demand exceeds supply, the exchange rate rises, and vice versa.
📕 Westward Ants
Westward Ants means Korean individual investors who invest in overseas, especially US stock markets.
- 'Westward' means the west (mainly the US), and it's the opposite concept of 'Eastward Ants' who invested in domestic stocks.
- After COVID-19, the number of individuals increasing overseas investment surged, attracted by the high returns of US big tech companies.
- The investment flow of Westward Ants is now directly affecting the exchange rate and foreign exchange market.
3️⃣ Principles and Economic Outlook
✅ Relationship Between Capital Outflow and Exchange Rate
Domestic capital outflow naturally increases dollar demand, acting as exchange rate upward pressure.
First, currency exchange demand for overseas investment directly affects the exchange rate. To buy US stocks, individuals exchange won for dollars through securities firms. In this process, dollar buying (won selling) transactions occur in the foreign exchange market. When exchange demand of hundreds of billions or trillions of won occurs daily, it directly affects supply and demand in the foreign exchange market. Especially when the US stock market is booming, overseas investment demand increases further, and exchange rate upward pressure grows.
Second, companies' overseas direct investment also plays a big role. When Samsung Electronics builds a semiconductor factory in the US or Hyundai Motor builds an electric car factory, funds worth billions of dollars are needed. These large-scale investments create massive dollar demand at once. As Korean companies' overseas investment has increased greatly recently, this structural dollar demand is increasing.
Third, sluggish foreign investment in Korea worsens the problem. Normally, foreigners should also invest in Korea as much as Koreans invest overseas to maintain balance. But recently, foreigners have been net selling Korean stocks or reducing investment. This leads to decreased dollar supply, accelerating exchange rate rise. Korea Discount, geopolitical risk, and low dividend yield are factors blocking foreign investment.
If capital outflow continues, exchange rate instability grows, and this also affects import prices and financial markets.
✅ Two Sides of Net Foreign Financial Assets
The increase in net foreign financial assets has both positive and negative aspects.
First, it can act as a foreign exchange safety net. A large net foreign financial asset means our country has many assets overseas. If a situation comes where we urgently need foreign currency, like during the 1997 foreign exchange crisis, we can secure dollars by selling these overseas assets. In fact, there's an assessment that Korea's net foreign financial assets helped overcome the crisis during the 2008 global financial crisis. Together with foreign exchange reserves, net foreign financial assets are factors that increase national credit rating.
Second, there are concerns about decreased domestic investment and growth slowdown. Money going out overseas means less funds to invest domestically. If companies have less money to build factories or invest in R&D domestically, jobs decrease and economic growth slows. One of the problems Japan experienced during the 'lost 30 years' was sluggish domestic investment. As capital went overseas, domestic economic vitality fell.
Third, increased exchange rate volatility increases economic uncertainty. A rapid increase in net foreign financial assets also means active capital inflows and outflows. When global financial markets become unstable, overseas asset values can plunge, and this can flow back domestically, rapidly changing the exchange rate. This volatility makes companies' import-export plans difficult and can cause price instability.
It's important to maintain net foreign financial assets at an appropriate level, and excessive increase can cause economic imbalance.
✅ Link Between Individual Investment and Macroeconomy
Although it was hard to imagine in the past, we've now entered an era where individual investors' choices directly affect the national economy.
First, the scale of individuals' overseas investment has reached a level that cannot be ignored. As of 2025, domestic individual investors' holdings of overseas stocks exceeded about $100 billion (about 140 trillion won). This is a huge scale, accounting for about 25% of foreign exchange reserves. Transactions buying and selling billions of dollars worth of overseas stocks occur daily, becoming a major supply and demand factor in the foreign exchange market.
Second, unpredictability has grown as investment trends change rapidly. In the past, the movements of institutional investors or foreign investors dominated the market. But now, individual investors also quickly share information through SNS, YouTube, and online communities and show collective behavior. When interest in a specific stock or theme surges, massive funds pour in in a short time, and this has immediate effects on exchange rates and financial markets.
Third, policy authorities' response has become difficult. In the past, controlling banks or institutional investors allowed some management of capital inflows and outflows. But now, because millions of individual investors invest based on their own judgment, policy intervention is not easy. The government cannot block overseas investment, nor can it forcibly induce domestic investment. Ultimately, the only solution is to improve the domestic investment environment to make people want to invest domestically voluntarily.
We've entered a new era where individual investors' rational choices come together to move macroeconomic variables.
4️⃣ In Conclusion
The record high of $2.7976 trillion in foreign financial assets contains more meaning than just a number. It simultaneously shows structural changes in the Korean economy and changes in the role of individual investors.
The overseas investment fever of Westward Ants is positive in terms of seizing global investment opportunities. In fact, many people who invested in US stocks earned much higher returns than when they only invested domestically. It's clearly a desirable change that individual investors' asset portfolios have diversified and understanding of global markets has increased.
However, there are worrying signals behind this. If the reason Koreans turn their eyes overseas is not simply "because US companies are good" but "because Korean companies are hopeless," it's a problem. Korea Discount remains, and domestic companies' innovation and growth are slow, while US big tech companies are growing explosively, leading the AI revolution.
The surge in net foreign financial assets means capital is flowing net outward from Korea to overseas. There's a positive aspect that it can become a safety net during a foreign exchange crisis, but the side effects of decreased domestic investment and increased exchange rate instability are also significant. In particular, exchange rate rises increase import prices, ultimately returning as a burden on our living costs.
The most important thing is that this phenomenon is not temporary. People who have experienced overseas investment once don't easily come back. Westward Ants' overseas investment will continue in the future, and this will act as structural dollar demand and exchange rate upward pressure.
So what should we do? From an individual investor's perspective, it's important to find the right balance between overseas and domestic investment. Portfolio diversification is good, but you must also consider exchange rate fluctuation risk. If you invest when the dollar is strong, you may incur exchange losses if the exchange rate falls later.
At the corporate and government level, fundamental changes are needed. We must resolve Korea Discount, improve corporate governance, and foster innovative industries. We need to create an environment where foreigners want to invest and Koreans also want to invest domestically. We need to rationalize regulations, increase transparency, and strengthen shareholder-friendly policies.
For young professionals or financial beginners, it's important to understand these macroeconomic trends. Concepts like exchange rates, capital inflows and outflows, and net foreign financial assets may feel difficult, but they ultimately directly affect our living costs, jobs, and investment returns.
Ultimately, Westward Ants' overseas investment is individuals' rational choice, but we've entered an era where it comes together to affect the national economy. In this new era where individual choices and the national economy are closely connected, we all need to increase our understanding of economics to make wiser judgments.
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