Home Dividends for Foreign Investors

Foreign investors are expected to take home dividends worth over 9 trillion won (US$ 8 billion) this year, more than double the amount local investors are expected to reap from dividends by overseas firms, data showed Sunday.

Overseas investors raked in a total of US$ 6.73 billion from dividends in the January-October period, according to the data by the Bank of Korea. When the average currency rate over the 10-month period is applied, the amount totals 7.4 trillion won.

Given that dividend payments to foreigners tend to spike at year-end, market watchers said South Korean companies are likely to pay out more than 9 trillion won to their overseas shareholders this year.

Meanwhile, the data showed that local investors earned 3.8 trillion won from dividends paid out by foreign companies in the cited period, raising worries about the impact the imbalance can have on local capital.

“Since it has only been three to four years since local investors started buying holdings in foreign firms, the imbalance is likely to continue for the time being,” said Lee Jong-woo, the research head at Solomon Investment & Securities Co.

Lee, however, said foreigners’ high dividend earnings may indicate an excessive outflow of sovereign wealth, given the fact that foreign capital in South Korea tends to be “unhealthy.”

Meanwhile, some suggested overseas investors may demand higher dividends amid ongoing global uncertainties.

“Foreigners may demand bigger payments to make up for investment losses if the eurozone financial crisis continues,” said Lee Chang-seon, a researcher at LG Economic Research Institute.

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