In a circumstance in which the relative investment importance of stock-type fund at home is slightly declining, the fact that the demand toward overseas fund investment is changing does not affect business trends at home and abroad.
Since the domestic economy in the year 2007 seems to be slowed down in comparison to last year, now is a difficult circumstance for investors to expect the rally of corporate results.
In the case of overseas business conditions, it is a high possibility that new-emerging market growth pace will be relatively continuous in comparison with home. This creates a possibility that it will act as a bullish factor for the stock markets of related countries as abundant overseas liquidity flows in.
The remainder of overseas investment fund establishment has rapidly increased 2.9 times from 4.5 trillion won (US$4.8 billion) at the end of 2005 to 12.9 trillion won (US$13.8 billion) at the end of 2006. Also, the fund inflow is on the rise as 1.6 trillion won (US$1.71 billion) came in during January 2007.
As offshore funds record a total of 464 funds plus new assets valued at 12.9 trillion won (US$13.8 billion), offshore funds showed features of 6.8 trillion won (US$7.4 billion), which is enlarged in comparison with the end of 2005.
In the case of overseas investment funds, stock-type accounts kept increasing continuously except for May and June in 2006 when equity market adjustment was all over the world. As of the end of January 2007, the relative importance of overseas stock fund accounts among the entire remainder of stock-type fund establishment reached 23.5%.
The reason commercial liquidity flows in to overseas fund investment like this originates in enabling high profit actualization in a short period in addition to regulation relief of overseas equity investment the government adopted for the activation of overseas direct investment.
Notably, domestic sales of overseas corporation establishment funds in domestic property operating companies were allowed. Such regulation relief measures offer investors many incentives for risk management and profit rate boosts by enabling them to invest diversely with overseas investment enlargement.
The investment fund outflow to overseas through overseas fund investment is expected to contribute to exchange rate stabilization by relieving domestic foreign exchange market's supply and demand structure, which shows a chronic excess supply circumstance.
However, investors need to pay attention to the fact that while funds can bring high profit in a short period, there is a risk at the same time. In particular, it is not desirable to concentrate the relative importance of a portfolio to specific countries such as new emerging markets because of excessively high profit rate.
That is, it is necessary in a nutshell for investors to hold a stable investment inclination in order to disperse risk by approaching to overseas fund investment from the middle and longterm standpoint.
What's more, corporations which invest in new emerging markets should prepare for political and economic uncertainty as well since some new emerging countries beef up overseas equity investment regulation and property price adjustment by the slowdown of world economic growth.