Foreign Funds Extend South Korea Securities Selloff With $2.13 Billion April Outflow

Korea Economic Daily

Summary

Foreign securities investment funds posted a net outflow of $2.13 billion in April, extending the streak of withdrawals to three months.
Foreign investors recorded a cumulative net outflow of $46.01 billion from the domestic stock market through April this year.
By contrast, bond funds returned to a net inflow of $550 million in April, helped by the country’s inclusion in a global government bond index.

Forecast Trend Report by Period

Foreign investors pulled a net $2.13 billion from South Korea’s stock and bond markets in April, marking a third straight month of outflows. The scale of withdrawals shrank sharply from March, when the monthly outflow hit a record high.

Bank of Korea data released on May 15 showed foreign investment in domestic securities posted a net outflow of $2.13 billion in April, combining stock and bond flows. That means more foreign money left the local securities market than entered it.

Monthly net outflows were $7.76 billion in February and $36.55 billion in March, with the outflow extending into April. Even so, April’s figure was far below March’s record monthly outflow.

Stock outflows continued by asset class. Foreign investors pulled a net $2.68 billion from equities in April, extending the streak to four consecutive months since January. Net foreign outflows from the domestic stock market totaled $46.01 billion in the first four months of this year.

Bond flows, by contrast, turned positive after a month of outflows. Foreign investors withdrew $6.77 billion from bonds in March, but brought in $550 million in April. The BOK said investment in mid- to long-term government bonds linked to South Korea’s inclusion in a global government bond index helped shift bond flows back into net inflow.

A BOK official said stock outflows extended to a fourth month as investors remained wary of geopolitical risks in the Middle East. Still, investment sentiment partially recovered after a ceasefire agreement between the US and Iran, sharply reducing the scale of net outflows.

Financial market risk indicators rose slightly. The average premium on five-year credit default swaps for South Korea’s foreign exchange stabilization fund bonds stood at 31 basis points in April, up 1 basis point from a month earlier. Daily fluctuations in the won-dollar exchange rate averaged 8.9 won, or 0.59%, down from 11.4 won, or 0.76%, in the previous month.

Oh Se-song, Hankyung.com reporter sesung@hankyung.com