Overview#
Bank of America (BofA) has raised concerns about the South Korean won facing increased pressure due to a rise in outbound direct investment. This comes even as South Korea enjoys a strong trade surplus, largely supported by the semiconductor industry.
Outbound Investment Trends#
In 2025, South Korea's outbound direct investment reached $72 billion, with a noticeable shift towards developed markets. The United States has emerged as the largest destination for these investments, while interest in Europe has also grown. Conversely, investments in China have decreased, with Southeast Asian nations (ASEAN) becoming more attractive alternatives.
Sector Focus#
Interestingly, manufacturing only made up less than 25% of total outbound investments, with the finance and insurance sectors taking the lead. BofA anticipates a significant increase in manufacturing investments directed towards the U.S. following a recent investment agreement between the two countries. This deal could account for about 80% of South Korea's annual foreign direct investment in the U.S., which is four times the current manufacturing investment level.
Currency Implications#
Despite the influx of foreign direct investment into South Korea, BofA suggests that this may not completely counterbalance the growing direct investment deficit. The combination of increased outbound investments and ongoing portfolio outflows is putting additional strain on the capital account. BofA highlights that persistent portfolio outflows are a major factor contributing to the weakening of the won, with outbound direct investment also playing a significant, albeit less discussed, role in this trend.