Korea Capital Market Institute

Korea’s outward portfolio investment in foreign equity securities has persistently risen as it has taken hold as an investment alternative in the low interest rate era. Distributing risks throughout a wide range of investment destinations is a key element to reap the benefits of portfolio diversification via overseas investments. In domestic residents’ outward equity investment, the proportion of developed countries has gradually picked up perhaps because the central pillar of such investment is moving away from the private sector toward the public sector. In the private sector, a regional bias towards a certain region such as China has been continuously observed. Furthermore, the regional bias including the home bias among overall domestic residents is higher than that of developed countries. Going forward, domestic residents’ outward investment in foreign equity will continue to increase. This requires the effort to break away from the old perception viewing outward equity investment as just a high-risk, high-return opportunity, and eventually to head in the direction seeking higher risk-adjusted returns. In particular, product diversification for global asset allocation is a must to help ordinary investors build an international portfolio and fully tap into the benefits of portfolio diversification.