Institutional overseas securities holdings fall for first time in 15 months amid Middle East war

By Kim Byeo-ri, The Herald Business

South Korean institutional investors' overseas foreign-currency securities holdings fell for the first time in 15 months at the end of the first quarter, as the Middle East war pushed share prices lower and drove bond interest rates higher.

The balance of major domestic institutional investors' overseas foreign-currency securities holdings stood at $503.33 billion at end-March, down $4.26 billion, or 0.8 percent, from $507.59 billion at end-2025, according to data on institutional investors' overseas securities investment trends in the first quarter released Sunday by the Bank of Korea.

The balance had risen for four consecutive quarters starting in the first quarter of last year, when it grew by $10.01 billion, before turning lower this quarter.

By investor type, asset managers posted the steepest decline at minus $4.75 billion, followed by securities firms at minus $400 million and insurers at minus $40 million. Foreign exchange banks bucked the trend, adding $930 million.

By product type, foreign equity holdings fell $4.01 billion — the largest quarterly drop since the third quarter of 2022, when they declined $10.29 billion — while foreign bond holdings slipped $450 million.

In contrast, Korean paper — foreign-currency-denominated securities issued abroad by domestic financial institutions or companies — rose $200 million.

The Bank of Korea said bargain buying flowed in as share prices corrected on the back of the Middle East war, expanding net investment, but valuation losses outweighed those inflows and pushed the foreign equity balance lower. For foreign bonds, rising US Treasury yields driven by inflation concerns tied to higher oil prices generated valuation losses that reduced the balance. Bond prices move inversely to interest rates: when rates rise, prices fall and investors incur losses, and when rates fall, prices rise and investors gain.