Foreign Inflows to U.S. Stocks Hit Record High with Net Purchases of KRW 1,280 Trillion Over One Year

Record High Since 1985 When Data Compilation Began
Second Quarter Net Purchases Surge 62% Year-on-Year
Fund Inflows from South Korea and Others Amid Stock Market Rally

The net purchases of U.S. stocks by foreign investors have reached an all-time high.

According to the Financial Times (FT) on the 26th (local time), as of July, the net purchases of U.S. stocks and investment fund shares by foreigners over the past 12 months amounted to 942 billion dollars (approximately 1.28 quadrillion won). This is the largest 12-month amount since the U.S. Treasury began compiling related statistics in 1985.

Wall Street sign in New York, USA. Photo by AP and Yonhap News Agency

In particular, the net purchases in the second quarter reached 426 billion dollars (about 579 trillion won), up 62% from the same period last year. This surpassed the previous quarterly record of 299 billion dollars (about 406 trillion won) set in 2022.

The influx of overseas capital was accompanied by a rising U.S. stock market. The S&P 500 Index rose by approximately 20% over the year leading up to last July. In the second quarter, although the market experienced a sharp downturn due to the Iran war, it managed to rebound, ending the quarter up 14.9%. This marks the highest quarterly increase since the second quarter of 2020.

The diversification of funds by investors from Korea and Taiwan also supported the buying trend. As the asset share of Samsung Electronics and SK hynix increased thanks to their rising stock prices, investors redistributed their funds into overseas markets such as the U.S. to reduce concentration risk.

Brad Setser, Senior Fellow at the Council on Foreign Relations (CFR), noted, "It is rare to see more than 200 billion dollars (about 270 trillion won) in funds flowing out of Korea into overseas stocks."

On the other hand, foreign demand for U.S. bonds has declined. Net purchases of U.S. bonds by foreigners fell from 314 billion dollars (about 427 trillion won) in the first quarter to 188 billion dollars (about 255 trillion won) in the second quarter. China’s holdings of U.S. Treasury bonds also declined to 618 billion dollars (about 84 trillion won), marking the lowest level since August 2008. This is attributed to China diversifying its assets into gold and government agency bonds.

Setser pointed out that as the U.S. is running a massive fiscal deficit, overseas investor demand for U.S. Treasuries has waned, adding, "The entire world is showing enthusiasm for U.S. stocks."

This content was produced with the assistance of AI translation services.