Foreign Investors Leaving Stocks, Rushing into Bonds... 9 Trillion Won Net Purchase in February

[Asia Economy Reporter Ji Yeon-jin] Foreign investors who sold off domestic listed stocks from the beginning of the year have been flocking to bond investments.

The Financial Supervisory Service announced on the 8th that foreign investors sold a net 3.243 trillion KRW worth of domestic listed stocks last month and made a net purchase of 8.988 trillion KRW in listed bonds, resulting in a net investment of approximately 5.745 trillion KRW in the domestic market. Foreign investors continued net selling of stocks for three consecutive months and net buying of bonds for two consecutive months since the beginning of this year.

Last month, foreigners net sold about 3.243 trillion KRW worth of listed stocks, holding a total of 797.5 trillion KRW at the end of the month. This amount increased by 9.6 trillion KRW compared to the previous month and accounted for 31.6% of the total market capitalization. They net sold 3.045 trillion KRW in the KOSPI and 198 billion KRW in the KOSDAQ. The Financial Supervisory Service estimated that the reduction in foreign investment was due to increased anxiety caused by the rise in U.S. Treasury yields.

Except for Europe (net purchase of 30 billion KRW), most regions showed net selling, with the Americas (-1.6 trillion KRW), the Middle East (-1.6 trillion KRW), and Asia (-700 billion KRW) selling the most in that order. By country, the Cayman Islands and the United Kingdom each made net purchases of 800 billion KRW. The United Arab Emirates and the United States were the largest investors withdrawing funds, with net sales of 1.6 trillion KRW and 1.4 trillion KRW respectively.

The amount of domestic stock holdings by country was led by the United States with 329 trillion KRW, accounting for 41.3% of all foreign holdings, followed by Europe (247.2 trillion KRW, 31.0%), Asia (104.6 trillion KRW, 13.1%), and the Middle East (29.5 trillion KRW, 3.7%).

Last month, foreign investors purchased 12.084 trillion KRW worth of listed bonds and redeemed 3.096 trillion KRW at maturity, resulting in a net investment of 8.988 trillion KRW. The total foreign bond holdings reached 161.5 trillion KRW, an increase of 10 trillion KRW from the previous month. This accounted for 7.7% of the total listed bond balance.

Asia made the largest net purchase of 3.6 trillion KRW, followed by Europe (2.6 trillion KRW), the Middle East (1 trillion KRW), and the Americas (300 billion KRW). Asia also led in bond holdings with 78.6 trillion KRW, accounting for 48.7% of total foreign holdings.

Foreign investors made net investments in both government bonds (6.4 trillion KRW) and currency stabilization bonds (2.6 trillion KRW), bringing their total government bond holdings last month to 130 trillion KRW (80.6%). They held 31.3 trillion KRW (19.4%) in special bonds.

Additionally, they made net investments of 5.3 trillion KRW in bonds with maturities between 1 and 5 years, followed by 2 trillion KRW in bonds under 1 year and 1.7 trillion KRW in bonds over 5 years. At the end of last month, foreign bond holdings were highest in the 1 to 5-year maturity category at 65.4 trillion KRW (40.5%), followed by over 5 years at 50.2 trillion KRW (31.1%), and under 1 year at 45.9 trillion KRW (29.4%).