Foreigners cashed out of Korean stocks in August as prospects for the second-half performance of the Korean Inc. turned murkier while renewing investment in bonds amid expectations for additional lowering in the policy rate.

According to the Bank of Korea`s data, foreign capital took out a net $1.95 billion from stocks in August while parking a net $1.43 billion in bonds, resulting in a net foreign capital outflow of $520 million in Korean securities. It is the first foreign capital outflow since October last year.

The bank said renewed concerns over the global economy following the escalation in U.S.-China trade war have soured investment sentiment for private investors, who mostly withdrew their capital from large-cap exporters.

Foreign appetite for bonds that stayed robust throughout the year except for July was re-whetted on growing likelihood of an additional cut in the policy rate by the central bank in next meetings in October or November.

Volatility in the foreign exchange market widened last month amid tit-for-tat trade barriers between Korea and Japan, worsening trade friction between the U.S. and China and insecurity in Hong Kong from democracy protests.

The dollar-won exchange rate breached the psychologically-important 1,200 won-mark. The U.S. dollar jumped to 1,211.2 won by the end of August from 1,183.1 won a month earlier. As of Sept. 6, it weakened to 1,196.9.

Daily currency volatility averaged 4.9 won in August, widening from 3.4 won in the previous month. The volatility rate rose to 0.41 percent from 0.29 percent over the cited period.

Local banks` daily trade of foreign currency averaged $26.81 billion in August, up $2.54 billion from the previous month.

The monthly average credit default swap (CDS) premium of five-year foreign exchange stabilization bonds stayed relatively stable at 32 basis points in August, more or less unchanged from 31 basis points in July. CDS is a financial derivative designed to transfer the default risk of a company or a country, with a lower CDS premium implying reduced default risk. Korea`s CDS premium has been falling gradually in the past years, averaging 57 basis points in 2017 and 44 basis points last year.

By Kim Yeon-joo and Cho Jeehyun

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