Foreign capital outflow from Korean securities market hit a six-year high in September amid escalated geopolitical tensions after North Korean defied international warnings and sanctions and carried out the sixth nuclear test in the month.

According to data released by the Bank of Korea (BOK) on Wednesday, foreign investors sold Korean stocks and bonds worth $830 million and $3.47 billion, respectively, in September.

Offshore investors net sold Korean securities worth $3.25 billion in August, keeping their selling spree for two straight months.

Total net withdrawal from Korean bonds reached $3.47 billion, the highest since February 2016 with $3.54 billion net outflow.

Profit-taking on top of escalated geopolitical risks fanned the capital outflow, said the BOK.

The volume of monthly outflow is the highest since August 2011 when foreign investors net sold $4.61 billion worth of Korean securities following the debt crisis in Europe.

Sentiment has improved this month, and foreign capitals are returning to Korean stock market.

Borrowing conditions for the country have deteriorated. The spread on the credit default swap for the five-year South Korean foreign exchange stabilization bonds averaged 70 basis points in September, up 7 basis points from a month earlier and highest since 71 basis points in February 2016.

A higher spread in the insurance against default makes it costlier for the Korean government and companies to issue bonds.

By Kim Gyu-sik and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]