Foreign investors took profit on Korean bonds in July after keeping up a buying spree for five months in a row, following the first rate cut by the Korean central bank in three years.
According to data released by the Bank of Korea on Friday, international investors net sold $310 million worth of bonds in Korea in July. Foreign investors took out $190 million from the local debt market in February but net purchased total $12.39 billion worth of bonds from March to June this year on bets on a rate cut move from the Bank of Korea after the economy contracted unexpectedly in the first quarter.
Steeper weakening in the Korean currency versus the U.S. dollar amid multiple trade woes, including the intensifying U.S.-China trade war and its own trade spat with Japan, also would have motivated pullout from the debt market. When Korean won weakens, the value of dollar-denominated Korean bonds falls.
Offshore investors, in July, were net buyers on Korean stocks, recording net capital inflow of $1.74 billion as foreigners bought IT shares at bargain value as the stocks were hammered by Tokyo’s de facto export embargo on memory chip and display making materials bound for Korea. Foreign capital turned buoyant on chip giants as supply adjustment by the dominant players could aid memory prices.
The inflow of foreign capital into the Korean securities market, bonds and stocks combined, totaled $1.43 billion in net.
The Korean won, meanwhile, was the third biggest loser in the emerging category.
The won lost 5.0 percent from 1,154.7 at the end of June against the U.S. dollar to 1,214.9 as of Aug. 7.
By Kim Yeon-joo and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]