Buy Korea
The Korea Exchange said on July 20 that foreign investors have purchased KOSPI shares worth more than 2.8 trillion won (US$2.43 billion) since the beginning of this month after having recorded a significant net sale immediately after Brexit late last month. Their net purchase started on June 29 and their net purchase value since then exceeds 3.3 trillion won (US$2.86).
“South Korean investors tend to dispose of their shares once KOSPI tops 2,000 points because the stock index has failed to exceed that point by a large margin for no less than six to seven years,” said Lee Jong-woo at the IBK Investment & Securities Research Center, continuing, “However, these days, foreign investors in the South Korean stock market are increasing their investment in the risky asset in order to utilize low interest rates and abundant liquidity.”
Foreign investors are becoming more and more aggressive in a number of emerging stock markets as well as the South Korean market. “Since Brexit, the total volume of bonds traded at negative rates of return has reached US$13 trillion with interest rates on the decline around the world,” Shinhan Investment Corporation explained, adding, “As the amount of profitable assets is on the decrease, investors are showing an increasing demand for assets in emerging countries that can guarantee a higher rate of return.”
According to Shinhan Investment Corporation, emerging market bond funds attracted US$6 billion for the past two weeks, which is equivalent to approximately 25% of the money that flowed into global bond funds during the same period. In addition, emerging market stock funds attracted US$1.8 billion during the period, when the total inflow into stock funds reached US$11.3 billion.