Foreign investment in S. Korean securities five-year high in 2017

2018.01.10 15:34:07 | 2018.01.10 15:34:33

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Despite political instability in the first half and escalated geopolitical risks in the latter half, foreign capital invested in Korean securities reached five-year high of $19.5 billion in the year of 2017.

According to data released by the Bank of Korea (BOK) on Wednesday, foreign investors net purchased securities worth $19.5 billion - $11.45 billion in stocks and $8.05 billion in bonds last year. The volume of annual inflow in 2017 was highest after $23.13 billion in 2012 and nine times larger than $2.17 billion a year ago.

Offshore investors net purchased Korean securities every month last year except for August and September when they net sold securities worth $3.98 billion and $4.32 billion, respectively, due to heightened tensions after North Korea missile and nuclear tests. They also net sold $2.49 billion in December to take profit.

Heavy foreign buying made Korean stock market and currency one of the world’s biggest winners last year. The main Kospi gained 22 percent and secondary Kosdaq 26 percent last year. The won appreciated 14 percent against the U.S. dollar.

The renewed confidence in market around the world on top of improved corporate and economic performance fueled investment in the Korean capital market, said an unnamed BOK official.

Amid the boost in foreign buying, borrowing conditions for the country have also improved. The spread on the credit default swap (CDS) for the five-year South Korean foreign exchange stabilization bonds averaged 55 basis points in December, down 11 basis points from a month earlier, marking the lowest since 52 basis points in June, last year. The BOK said that the spread fell amid eased geopolitical tensions on the Korean peninsula.

By Kim In-oh and Lee Eun-joo

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