Foreigners Who Sold Domestic Stocks Bought Bonds Instead

[Asia Economy Reporter Koo Eun-mo] Amid the ongoing sell-off by foreign investors in the domestic stock market due to the impact of the novel coronavirus disease (COVID-19), it has been revealed that these investors are increasing their investments in the bond market. This is interpreted as a result of heightened preference for safe assets like bonds over risky assets such as stocks, as uncertainty in the international financial markets grows due to the spread of COVID-19.

According to the Financial Supervisory Service on the 13th, foreign investors made a net investment of 3.581 trillion KRW in the domestic listed bond market last month. In March alone, foreigners net purchased 7.399 trillion KRW, while 3.818 trillion KRW matured and was repaid. As a result, foreign investors have continued net investments for three consecutive months since switching to net investment in January this year.

By region, Asian investors led the purchases with a net investment of 4.247 trillion KRW, while the Americas (-758 billion KRW) and the Middle East (-135 billion KRW) showed net withdrawals. By bond type, government bonds, considered safe assets, accounted for most of the net investment at 3.95 trillion KRW, whereas Monetary Stabilization Bonds (-1.105 trillion KRW) and corporate bonds (-44 billion KRW) recorded net withdrawals. By remaining maturity, long-term bonds of 5 years or more (4.09 trillion KRW) and bonds with maturities between 1 and 5 years (827 billion KRW) showed net investments, while short-term bonds under 1 year (-1.337 trillion KRW) showed net withdrawals.

During the same period, the balance of foreign-held listed bonds increased by 4.609 trillion KRW compared to the end of February, reaching 133.326 trillion KRW. The balance of listed bonds, which was 123.651 trillion KRW at the end of last year, continued to rise this year (128.373 trillion KRW in January, 128.717 trillion KRW in February), surpassing 130 trillion KRW for the first time on a month-end basis.

Among the holdings, government bonds accounted for more than 80%, totaling 107.989 trillion KRW, followed by special bonds (25.278 trillion KRW) and corporate bonds (59 billion KRW). By remaining maturity, bonds with maturities between 1 and 5 years accounted for 52.684 trillion KRW (39.5%), those with 5 years or more for 43.367 trillion KRW (32.5%), and those under 1 year for 37.275 trillion KRW (28.0%).

Over the past month, foreign investors bought safe assets such as bonds while selling risky assets like stocks. Last month, foreign investors net sold 13.45 trillion KRW worth of domestic listed stocks. Although they purchased stocks worth 69.707 trillion KRW, they sold stocks worth 83.157 trillion KRW, recording net sales for two consecutive months following February (3.225 trillion KRW). Foreign investors have continued net selling for 27 consecutive trading days in the domestic KOSPI market from the 5th to the 10th of last month.

By region, Middle Eastern investors made net purchases of 594 billion KRW, but this was insufficient to offset net sales by investors from the United States (5.545 trillion KRW) and Europe (5.025 trillion KRW). By holding size, U.S. investors’ holdings decreased by 54.223 trillion KRW (-21.5%) to 197.455 trillion KRW compared to the end of last year (251.678 trillion KRW). During the same period, holdings by investors from the United Kingdom, Luxembourg, and Singapore also decreased by 11.86 trillion KRW (-24.8%), 8.446 trillion KRW (-22.0%), and 8.148 trillion KRW (-23.9%), respectively.

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