Foreign Stock Investment Funds Experience Net Outflow for 5 Consecutive Months

[Asia Economy Reporter Eunbyeol Kim] Foreign investors withdrew about 500 billion won of stock funds from the domestic market last month as well.

According to the 'International Finance and Foreign Exchange Market Trends' announced by the Bank of Korea on the 10th, foreign stock investment funds in Korea recorded a net outflow of 440 million dollars in June. Based on the average KRW-USD exchange rate at the end of June (1,203 won), approximately 481.2 billion won was withdrawn.

Although this marks the fifth consecutive month of net outflow since February, the scale has significantly decreased compared to April (-4.32 billion dollars) and May (-3.27 billion dollars).

On the other hand, foreigners continued to purchase domestic bonds in June.

Foreign investment funds in domestic bonds newly inflowed by 2.92 billion dollars last month. The net inflow of bond investment funds increased compared to May (2.1 billion dollars).

A Bank of Korea official stated, "Due to expectations of economic recovery, the outflow of foreign investors' stock funds decreased, and in the case of bonds, foreign investment continued mainly in public funds."

The total foreign securities investment funds, combining stocks and bonds, recorded a net inflow of 2.48 billion dollars in June. This reversed from a net outflow of 1.17 billion dollars in May to a net inflow within a month.

The credit default swap (CDS) premium for the 5-year Korean government bond (Foreign Exchange Stabilization Fund bond) averaged 27 basis points (1bp=0.01 percentage point) last month. This is significantly lower than the May average (32bp) and almost similar to the level in February (26bp), before COVID-19 spread worldwide.

CDS is a type of financial derivative that acts as insurance compensating for losses when the issuing country or company defaults. Generally, if the economic risk of the country increases, the premium also rises.

In the foreign exchange market, the KRW-USD exchange rate at the end of June was 1,203 won, down more than 35 won from the end of May (1,238.5 won). The average daily fluctuation of the KRW-USD exchange rate last month was 6.3 won, larger than May's 4.4 won.

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