Bond-backed funds proliferated to their highest level in nearly 20 years in Korea as investors rushed to park their money in safer debt assets amid escalating uncertainties about the economy.
According to the Korea Financial Investment Association on Tuesday, local management companies’ total target amount for funds designed to invest in debts reached 121.37 trillion won ($99.56 billion) in July, the highest since October 1999. The amount has grown every month since October last year when stock markets across the world tumbled sharply on a sudden escalation in U.S.-China trade dispute.
In contrast, target amounts for funds investing in stocks came down to 79.3 trillion won in July, the lowest since December 2017. The figure has stayed on a downward path after peaking at above 88 trillion won in January this year.
Investors have been flocking to safer fixed assets such as bonds with little sign of easing in the U.S.-China trade war. Market conditions worsened for export-reliant Korea entering July after Tokyo launched export control of three chemicals used in memory chip and display production bound for Korea in apparent complaint over Seoul’s hard-line policy on wartime issues.
Amid multiple trade whammies, the main bourse Kospi retreated 5.0 percent and the junior Kosdaq 8.7 percent in July. Meanwhile, Korean government bonds have touching new lows. On July 31, the yield of the three-year government fell to 1.292 percent or below the psychologically important 1.3-percent mark as debt across the yield curve all headed to new lows.
Market experts anticipate investors’ demand for risk-free assets continue to stay robust amid escalating market uncertainties. The Kospi already has lost 3.8 percent and Kosdaq 9.6 percent until Monday or in the first five days of this month.
By Kim Je-lim and Cho Jeehyun
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