Eased Geopolitical Risks Play a Role
Foreign investment in South Korean bonds came to 113.80 trillion won (US$101.70 billion) in 2018, reaching a record high. The growth was attributed to the country’s high international credit standing and eased geopolitical risks on the Korean Peninsula, though external uncertainties continued, such as the trade dispute between the United States and China and a rise in interest rates in the United States.
The balance of foreign ownership of domestic bonds stood at 113.80 trillion won (US$101.70 billion) in 2018, up 15.30 trillion won (US$13.67 billion) from a year earlier, according to the “White Paper on Government Bonds in 2018” report released by the Ministry of Economy and Finance (MOEF) on Feb. 27. The figure surpassed the 100 trillion won (US$89.37 billion) mark for the first time in three years after 2015.
As the balance of South Korean bonds held by offshore investors increased, the ratio of foreign ownership to the total balance of bond issuances grew again as well. The figure was 6.8 percent to 7 percent in 2014 but decreased in 2015 and 2016 before rising to 6.6 percent again in 2018.
By investor, the ratio of foreign central banks which have a medium to long-term investment propensity, increased from 11 percent at the end of 2009 to 50 percent at the end of May in 2016 and 52.5 percent at the end of 2018.