Foreigners' Net Purchases of U.S. Stocks Hit Record High, Led by Korean Individual Investors Investing in Overseas Stocks

[Financial News]  

Foreign investors' net purchases of U.S. stocks reached a record high. The center of gravity of their investments is shifting from Treasury securities to stocks.
The FT reported this on the 26th (local time), citing data from the U.S. Department of the Treasury and the Bureau of Economic Analysis (BEA).

According to the BEA, foreign investors' net purchases of U.S. stocks and investment fund shares totaled $942 billion in the 12 months through July, the largest amount on record since related data collection began in 1985. This was approximately 1,280 trillion won.
Net purchases in the second quarter also surged 62% year on year to $426 billion, far exceeding the previous second-quarter record of $299 billion set in 2022. The figure jumped from $110 billion in April to $182 billion in June before slowing to $3.7 billion in July. Foreign investors continued their net purchases of U.S. stocks for six consecutive months.
Amid the foreign buying, the Standard & Poor's 500 Index (S&P 500 Index), which broadly reflects conditions on the New York stock market, rose approximately 20% through July this year. Semiconductor stocks, including SanDisk, Western Digital, and Intel, stood out during this period.
The S&P 500 Index temporarily came under selling pressure after the war in Iran broke out, but it rebounded and recorded a 14.9% gain in the second quarter. That was its strongest second-quarter performance since 2020.

Purchases of U.S. stocks by investors from South Korea and Taiwan also contributed to this trend.
Brad W. Setser, a senior fellow at the Council on Foreign Relations (CFR), pointed out that strong stock market performance in some countries, including South Korea and Taiwan, prompted investors in those countries to buy U.S. stocks. Korean individual investors investing in overseas stocks, in particular, are one of the forces behind this trend.
Setser explained, "As shares of Samsung and SK hynix rose, investors who had bought those stocks in the past faced so-called concentration limits and began buying U.S. or other global stocks to diversify their risk." He added, "An unusually large amount of money—more than $200 billion, or approximately 271.8 trillion won—flowed out of the South Korean stock market and into global equities, mainly U.S. stocks."

U.S. Treasury securities are gradually losing the attention of foreign investors.
Foreign investors' net purchases of U.S. Treasuries plunged from $314 billion in the first quarter to $188 billion in the second quarter.
This appears to be largely because China sold U.S. Treasuries. Reports indicate that China's holdings of U.S. Treasuries have fallen to $618 billion, the lowest level in 18 years since August 2008. China is selling U.S. Treasuries and diversifying its portfolio into gold, agency bonds, and other assets.
Setser pointed out that the world appears to be shunning U.S. Treasury securities as the United States struggles with a massive fiscal deficit, while instead indulging in U.S. stocks.

[email protected] Song Kyung-jae Reporter