Amazon stock price 10-year chart The balance of overseas stock investment by domestic investors more than doubled from the end of 2019, right before the outbreak of Corona 19, surpassing 100 trillion won. The picture is a 10-year graph of the US stock price of Amazon. By Kim Byung-eun, staff reporter
In the era of 10 million stock investors, investment has become a culture that encompasses generations. They did not stop at becoming shareholders of large domestic companies such as Samsung Electronics (KS:) and Kakao. They are turning overseas and aggressively buying stocks of global innovators.
The rationale for overseas investment is clear. A typical example is the difference in returns between investors who have allocated their assets to the global market over the past 10 years and those who have focused on domestic stocks. As the domestic stock market has recently undergone correction, the gap is widening. Experts say that the level of investment, which has become a culture in the wake of the COVID-19 crisis, needs to take a leap forward to ‘global asset allocation’.
We analyzed the 10-year returns (as of the end of July this year) by receiving the top 50 domestic and foreign stocks, which were bought the most by domestic individual investors in 2011, from the Korea Exchange and Korea Securities Depository. As a result, the 10-year return on domestic stocks was only 27.26%. Of the 50 stocks, 30 had a negative 10-year return. 3 were delisted. During the same period, if you invested in foreign stocks such as the US, China (including Hong Kong) and Japan, the rate of return reached 397%. There were more stocks (12) that made a profit of 400% or more than those that made a loss (11). If you have turned your eyes to the global market and invested for a long time, your balance is likely to have risen significantly.
It is the high-income earners who have opened their eyes to overseas investment early. As a result of analyzing customer assets by Mirae Asset Securities, it was found that investors with more than 1 billion won put 20% or more of their assets in overseas stocks, funds, and bonds. This is the reason why the ratio of overseas investment is in the single digit, which is why there is a huge difference in returns with those of less than 100 million won.
For this reason, foreign investors are on the rise. According to NH Investment & Securities, the number of overseas investment customers increased by 1265% while the number of domestic investment customers increased by 106% in the two years since 2019. As a result, the number of foreign stocks held by domestic investors exceeded 10,000. Recently, overseas stock-type ‘dinosaur funds’ with a management scale of more than 1 trillion won have emerged one after another, and the balance of overseas stock holdings of Seohak Ants has exceeded 100 trillion won.
In 2021, we are entering a new period in which Koreans’ financial means will be expanded to global investment products following real estate and domestic stocks. Comparing the 10-year performance of domestic and overseas stocks in ‘Top 50 Net Buying’
Although the domestic average profit was 27%… In 30 out of 50 stocks, Mr. A, who has a net worth of 20 billion won, has filled 60% of his portfolio with domestic stocks and funds for a long time. The rest was held in cash. He was recommended to invest abroad several times, but he avoided it because he did not want to take an unfamiliar adventure. Domestic stocks and funds also did not have bad returns. However, it is also true that I have always felt anxious about the fluctuating returns over time.
Even when the domestic stock market rose sharply after the COVID-19 crisis, I was not at ease. Whenever I thought, ‘This time will be different’, I remembered that the yield plummeted. At the end of last year, he decided to look abroad, which had been ‘unknown territory’. The proportion of domestic assets after profit taking was reduced to 29%. Instead, they bought foreign stocks and set the proportion to about 30%. The asset allocation effect was successful. This is because overseas stocks have held up with stable profits while the domestic stock market has recently fluctuated over concerns about semiconductor peak-out (passing a high) and tapering (reduction in asset purchases). 10 years of domestic battles… Over the past year, when domestic stock investment has become a daily routine after the Corona 19 crisis, super-rich people have spread their assets globally. Among Mirae Asset Securities customers, wealthy investors who invest more than 1 billion won increased the proportion of overseas stocks out of their total assets from 11.0% to 17.2% in one year. The balance of overseas stocks increased from KRW 1 trillion to KRW 2.2 trillion. While investors with less than 100 million won still invest most of their assets in domestic stocks and funds, they have allocated them to various assets early.
It is analyzed that such a move by high-wealth owners is largely due to the experience they have accumulated. Ryu Hee-seok, head of Mirae Asset Securities’ VIP Solutions Division, said, “High-valued wealthy people have experience in successfully diversifying their global investments whenever the domestic stock market shakes. reason,” he explained.
In fact, the difference in returns between domestic investors and those who turned their eyes to overseas early was huge. The average annual growth rate of the KOSPI since 2010 has been 6.2%. During the same period, the US S&P 500 rose an average of 11.5% annually. Although there have been fluctuations from year to year, the long-term investment returns widened as the years passed. If you bought and held stocks 10 years ago, the difference in the 10-year long-term yield between the 50 domestic stocks and 50 foreign stocks, which individual investors bought the most 10 years ago, was much greater. The 10-year return of domestic stocks was only 27.26%, but the return of 50 foreign stocks reached 397%. Amazon (1822.35%), Tencent (1434.27%), Canadian Solar (1413.16%), BYD, Apple (NASDAQ:), Nike, Estee Lauder, etc. Among domestic stocks such as Celltrion (598.35%), Iljin Materials (372.94%) and TK Chemical (263.64%), some stocks recorded high long-term returns, but there were far more stocks (30) that suffered losses over 10 years.
Indirect investment through funds also showed high returns for investors who turned their eyes to the US and China. According to F&Guide, a fund evaluation company, among overseas equity funds, 114 funds (including ETFs) with a five-year return of more than 100% significantly exceeded those of domestic equity-type funds (40). Start of a full-scale expedition As the perception that global diversification is highly likely to catch two rabbits of ‘profitability’ and ‘stability’ grew, small-scale investors began to invest in expeditions in earnest. This is why the balance of foreign currency securities held by domestic investors recently exceeded 100 trillion won.
According to NH Investment & Securities, the number of overseas investors increased by 1265% while the number of domestic investment customers increased by 106% in the two years since 2019. In particular, among customers with less than 100 million won, the number of customers who made an overseas investment jumped 2282% from 13,684 in 2019 to 325,980 (as of the end of June) this year. During the same period, among high-income earners over 1 billion won, those who made new overseas investments increased by 71%. It is interpreted that the overseas investment craze has rapidly spread to small investors who make up most of the investors. Jin-gon Kim, managing director of Premier Blue at NH Investment & Securities, said, “Due to the nature of the domestic stock market, which is highly affected by exchange rates and external variables, it is desirable to diversify assets in dollars and overseas investments. If you put it into practice, you can achieve long-term success.”
By Park Jae-won/Seo Hyung-gyo reporter wonderful@hankyung.com
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