Foreign capital inflows into South Korean stocks and bonds hit a 17-month high last month.
The South Korean securities market had US$4.78 billion (5.62 trillion won) worth foreign capital inflows in June, the largest amount in 17 months since January last year when US$5.22 billion (6.14 trillion won) flowed in, according to a report released by the Bank of Korea (BOK) on July 10. Foreign funds flowed into the domestic securities market for the fifth consecutive month since January this year.
Of the total, US$4.56 billion (5.36 trillion won) flowed into the local bond market last month. The figure slightly decreased from US$6.04 billion (7.10 trillion) in May, but it was higher than usual. This was because investment in bonds became more attractive due to the likelihood of a cut in the benchmark interest rate.
The remaining US$220 million (258.76 billion won) was invested in domestic shares. The stock market saw foreign capital movements turning from an outflow to an inflow after the United States and China reached a truce in their escalating trade war.
The monthly premium for credit default swap (CDS) of the country’s five-year foreign exchange stabilization bonds averaged 33 basis points in June, down 2 basis points from 35 basis points in the previous month. It was attributed to the eased concern about the global trade dispute. A lower CDS premium means a lower sovereign credit risk.