Foreign Securities Investment Hits 2-Year High in May... Stocks See Net Inflow for First Time in 10 Months

Net Inflow of $9.29 Billion in Securities Investment Funds...
$7.83 Billion Concentrated in Bonds
$1.45 Billion in Stocks...
First Net Inflow in 10 Months

Last month, the net investment by foreigners in the domestic securities market reached its highest monthly level in over two years. This was mainly due to a significant net inflow of bond funds, as well as a turnaround to net inflows of stock funds for the first time in ten months.

On the 30th of last month, the status board in the dealing room of Hana Bank in Jung-gu, Seoul displayed the KOSPI, the KRW-USD exchange rate, and the KOSDAQ. Photo by Jo Yongjun

According to the "Trends in International Finance and Foreign Exchange Markets After May 2025" released by the Bank of Korea on the 13th, foreign funds in the domestic stock and bond markets recorded a net inflow of $9.29 billion last month. This marks the highest level since May 2023 ($11.43 billion) and represents a shift to net inflows in just one month.

In May, foreign investment in domestic securities was led mainly by bond funds. Bond funds saw a net inflow of $7.83 billion last month. An official from the Bank of Korea explained, "The continued net inflow was driven by increased incentives for short-term arbitrage and solid investment demand for mid- to long-term bonds."

Stock funds also turned to net inflows for the first time in ten months since July of last year. Stock funds recorded a net inflow of $1.45 billion last month. This was due to improved investor sentiment, which was influenced by the easing of risk aversion following progress in global trade negotiations.

The KRW-USD exchange rate fell significantly from 1,421.0 won per dollar at the end of April to 1,380.1 won at the end of May. The daily volatility rate in May was 0.52%, down from 0.67% in the previous month. The KRW-USD exchange rate fluctuated due to expectations of stronger Asian currencies and progress in US-China trade negotiations, but ultimately declined. This was due to several factors: the weakening of the US dollar caused by concerns over the expansion of the US fiscal deficit and credit rating downgrades, as well as net purchases of domestic stocks by foreigners.