Not only is the number of foreign residents in the country on the rise, so is their contribution to the economy.

According to the Korea Exchange yesterday, local shares owned by foreign investors reached a record high on the back of growing optimism about an economic recovery.

Foreigners held 420.4 trillion won ($387.2 billion) worth of shares in the country’s benchmark stock market Kospi as of Feb. 20, up 2.3 percent from 410 trillion won at the end of last year.

It marks the first time foreign ownership of local shares has exceeded 420 trillion won.

“It is a positive sign that local companies are becoming more appealing to foreign investors,” said Lee Won-young, an analyst at HMC Investment & Securities. “Overseas investors have scooped up Korean shares on a steady basis, except for a few months after the 2008 global financial crisis.”

In the wake of the global financial crisis in 2008, foreign ownership of stock hovered around 159 trillion won. However, owing to the recent buying spree by foreign investors, the Kospi recently recovered to the 2,000 mark.

Foreign investors scooped up 1.4 trillion won worth of shares this month alone, according to data as of last Friday.

Shares listed on the main bourse in Seoul accounted for 97.6 percent of the combined foreign investment, while foreigners also held stocks worth 9.9 trillion won in the tech-heavy Kosdaq market, according to the KRX.

“The fact that foreign ownership of local shares reached a record high means that the long-term outlook for the Korean stock market is bright,” said Jee Ki-ho, an analyst at LIG Investment & Securities. “Historically, growth in local shares held by foreigners preceded a rally in the Kospi.”

In the fourth quarter of 2003, foreigners held 200 trillion won worth of shares, leading the Kospi to hit the 1,000 mark for the first time, according to analysts.

“If the current trend continues, the Kospi is likely to hit 2,200 by the end of the year,” Jee said.

Meanwhile, foreign businesses are expanding their presence in Korea.

According to the Ministry of Knowledge Economy yesterday, the combined number of Koreans hired by 1,000 foreign businesses stood at 501,000 as of the end of 2011, employing 17,000 more local workers than in 2010.

The figure accounts for 6.2 percent of the country’s total number of employed at the time, up slightly from 6 percent in 2010.

The surveyed companies are established based on a foreign investment of $500,000 or more. And there are 14,809 such businesses.

“In recent years, foreign businesses and investments are on the rise, perhaps owing to increased support from the government,” said Yang Hae-gu, an official at the Knowledge Ministry.

Companies receive tax breaks, financial aid and administrative support. About 64 percent of them said in the survey that government support was a factor in deciding to invest in Korea.

According to the official, total foreign direct investment in the country surged from $13.6 billion in 2011 to $16.3 billion last year.

Foreign business operations in the country also are improving. The 1,000 businesses recorded combined sales of 482 trillion won in Korea in 2011, up 20 percent from 399 trillion won the previous year.

The ministry said foreign businesses operating in the country showed sound profitability, as the ratio of operating profit to net sales averaged 6.04 percent compared to 4.49 percent for domestic businesses.


By Song Su-hyun [ssh@joongang.co.kr]