Net worth minus foreign exchange reserves is $ 300 billion … “Expect to serve as a security pot”
Unsure about domestic investors’ participation in “taking a loss” … Even experts are skeptical
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The government is considering ways to attract private investment in foreign financial assets to Korea to calm the sharp rise in the exchange rate. Just as the government releases foreign exchange reserves when the exchange rate skyrockets, bringing private foreign assets to Korea can be used to stabilize the foreign exchange market. The government’s calculation is that there is sufficient incentive for investors to return their foreign assets to Korea when considering the expected foreign exchange earnings.
According to the Ministry of Strategy and Finance on the 3rd, total external financial assets amounted to $ 2.12 trillion (approximately 2973 trillion won) as of the second quarter. Excluding foreign exchange reserves, about $ 1.7 trillion (about 2380 trillion won) are external assets held by the private sector. Foreign financial assets owned by the private sector include foreign stocks and bonds purchased to acquire shares of foreign companies acquired for the purpose of management participation or capital gains and various types of foreign assets owned by Koreans, such as other trade receivables or deposits abroad .
The government is looking into the incentives, believing it will help stabilize the foreign exchange market if the dollars obtained from the sale of privately held external financial assets for $ 1.7 trillion can be imported into Korea. There is also talk of tax incentives for investing imported foreign goods in Korea. The government believes that as the dollar won exchange rate rises, there is a high chance that investors wishing to make profits in foreign currency will voluntarily sell assets overseas and invest them in Korea. I think that if we give incentives to such a situation, the sale of assets abroad will not be activated. Since 2015, the government has promoted various measures to stimulate overseas investment, including tax-free foreign funds. Net external financial assets (external assets minus external liabilities) rose rapidly from minus $ 97.7 billion at the end of 2012 to $ 744.1 billion in the second quarter of this year. Excluding foreign exchange reserves ($ 436.4 billion) at the end of August, about $ 300 billion of net financial assets were held by the private sector. A Ministry of Strategy and Finance official said: “The reason why the government has increased private external assets is that external assets act as a safety net during a rapid rise in the exchange rate. “Because I expected you to,” he said.
However, it is unclear whether the private sector will sell external financial assets at the will of the Ministry of Strategy and Finance. This is due to the fact that losses in external financial assets such as foreign stocks and bonds invested by domestic investors have increased due to global tightening. Unless it is a stop loss, the company is unlikely to sell its external financial assets at a loss. According to the National Pension Service, which invests more than a quarter of its total investment in foreign equities, the fund’s asset valuation was 882 trillion won at the end of June, down more than 45 trillion won in a quarter. since the end of March (928 trillion won). In particular, the return on foreign warehouse management recorded a loss of 12.59%. Looking at the case of the National Pension Service, known as the ‘big hand’, it is very likely that the situation of other institutional and individual investors will be similar or worse. A senior financial sector official said: “Of the net external assets, most of the areas that can be considered for return incentives will be overseas equity investments. Ha Jun-kyung, a professor of economics at Hanyang University, said: “The tax benefits may have a slight effect, such as allowing goods to be imported more quickly, but it will not be a radical measure to change the big trend.” The Ministry of Strategy and Finance said: “We are not considering a plan to grant tax benefits on transfers when private companies sell foreign shares and convert them into won.”
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