Capital Outflow
It has been found that foreign investors recorded a net sale in the Korean bond market this month for the first time in four months. In particular, American funds, which are regarded as long-term investors, are leaving the market one after another, signaling the end of a liquidity boom. The situation is likely to get worse if the United States, whose GDP growth rate amounted to 5% per annum in the third quarter, activates the exit strategy.
According to the Financial Supervisory Service, foreign investors disposed of listed bonds worth a total of 320 billion won during the first 23 days of this month to record a net sale for the first time since August, when the outflow had reached 82 billion won. U.S. investors’ selling amount totaled 230 billion won, followed by Japanese (90 billion won) and Luxembourgian (50 billion won).
Foreign investors are opting out of the Korean stock market, too. According to the Korea Exchange, they recorded a net selling of 2.2151 trillion won in the KOSPI market this month. The largest net selling amount of this year was posted in that month. The previous net sale had been recorded just two months ago.
A number of experts are predicting that capital outflow from the emerging countries including Korea is likely to speed up as the United States is expected to raise its interest rate next year. They also pointed out even European funds, which are more volatile than American and Japanese funds, could jump on the bandwagon sooner or later.