Foreigners Selling Stocks and Buying Bonds in South Korea

The Bank of Korea announced on July 14 that foreigners in the South Korean stock market showed a net investment outflow of US$440 million last month after a net outflow of US$8.23 billion in the previous month.

They continued to sell South Korean stocks from December last year to March this year. Although April showed a net inflow of US$590 million, the net outflow surged in May.

On the other hand, foreigners in the South Korean bond market showed a net investment inflow of US$8.76 billion in June, when the investment increased for the sixth consecutive month and the net inflows of both public and private money substantially increased from the previous month.

“This has to do with Korean bond yields more attractive than those of countries sharing the same credit rating, expectations for an economic recovery, and South Korea’s stable economic fundamentals,” the central bank explained, adding, “Last month, foreigners’ securities investment in South Korea posted a net inflow of US$8.32 billion.”

The average CDS premium of the five-year government bond was 18 basis points last month. For reference, the average was 19 in May this year, 31 in 2019, and 27 last year. In other words, the South Korean economy is handling risks successfully.