‘Seoul’s debt portfolio still sound’

The Bank of Korea said Thursday that South Korea’s foreign currency liquidity remained fundamentally sound with a slight increase in short-term foreign debt last year.

However, the rise in external debt with a maturity of less than a year was not severe enough to trigger concerns over the soundness of the country’s foreign portfolio.

The short-term foreign debt increased by $3.5 billion to $115.3 billion at the end of last year, accounting for 27 percent of the total external liability of $425.4 billion, the BOK data showed.

The ratio of short-term debt to total debt increased from 26.4 percent in 2013. But it was well below the level of 51.9 percent in 2008 during the global financial crisis.

Korea has kept the ratio at around 20 percent over the last two years. The low ratio means that Korea has the capability to withstand an abrupt surge in foreign capital outflow.

Also, the ratio of short-term external debt to the country’s foreign exchange reserves stood at 31.7 percent last year, down from 32.3 percent a year ago, the lowest level since the global financial crisis of 2008, the central bank said.

The country’s foreign reserves stood at $363.6 billion last year.

“This means that Korea has increased its capability to pay its external debt,” said a BOK official.

Analysts said this could positively affect Korea’s credit rating.

The country’s net international investment position stood at $81.9 billion last year, turning positive for the first time. In 2013, Korea had a negative NIIP of $37.2 billion.

The NIIP is the value of foreign assets held by Koreans, minus the country’s foreign debt. When positive, it means that Korean investment overseas exceeded foreign investment at home.

Korean investment overseas stood at $1.8 trillion at the end of last year, up $112.7 billion from a year ago. Foreign investment in Korea decreased $6.4 billion to $998.3 billion in the same period, the central bank reported.

The country’s continued current account surplus was able to boost Korean investment overseas, contributing to the positive NIIP. Korea extended its current account surplus for 35 consecutive months in January this year.

The Ministry of Strategy and Finance said it would continue to monitor the global capital markets to improve the country’s foreign currency portfolio’s soundness.

Meanwhile, foreign investors became net buyers in the Korean stock market last month, the Financial Supervisory Service said Thursday.

Their shareholdings of Korean stocks worth 437.5 trillion won accounted for more than 30 percent of the stock market capitalization.

By Park Hyong-ki (hkp@heraldcorp.com)