Foreign Stock Funds See Net Outflow of 3.2 Trillion Won Amid COVID-19 Impact

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Last month, foreign investors withdrew stock funds amounting to 2.7 billion dollars (approximately 3.2 trillion won) from the domestic market. This is due to deteriorated investment sentiment caused by the spread of the novel coronavirus infection (COVID-19).

According to the 'International Finance and Foreign Exchange Market Trends since February' released by the Bank of Korea on the 12th, foreign capital in the domestic stock market recorded a net outflow of 2.66 billion dollars last month. This is the largest scale in 1 year and 4 months since October 2018 (4.03 billion dollars).

Applying the average monthly won-dollar exchange rate last month (1,195.16 won), about 3.18 trillion won was withdrawn.

The Bank of Korea stated, "Stock funds experienced a net outflow due to weakened investment sentiment caused by the spread of COVID-19," and "interest rates in advanced countries and global stock prices also fell sharply." Conversely, in the bond market, foreign investment funds newly flowed in by 310 million dollars (about 370 billion won).

Indicators representing the risk of national default slightly increased due to the impact of COVID-19.

The credit default swap (CDS) premium for the 5-year Korean government bond (Foreign Exchange Stabilization Fund bond) averaged 26 basis points (1bp = 0.01 percentage point) last month, rising 3bp compared to the previous month. However, it remained lower than last year's average (31bp). CDS is a type of financial derivative product that acts as insurance compensating for losses when the issuing country or company defaults. When default risk increases, the premium tends to rise.

The won-dollar exchange rate rose sharply in February and then showed a decline in early March. The won-dollar exchange rate at the end of February (1,213.7 won) was 21.9 won higher than at the end of January (1,191.8 won). However, as of the 10th of this month, it has fallen to 1,193.2 won.

This content was produced with the assistance of AI translation services.