Foreigners' Korean Bond Investment in September Shows First Net Outflow This Year... Impact of Record High Maturity Redemptions

[Asia Economy Reporter Eunmo Koo] Since January, foreign investors who had maintained a net investment stance in the domestic bond market have turned to net redemption for the first time this year amid the largest-ever maturity repayments. The stock market also saw two consecutive months of selling pressure.

According to the "September Foreign Securities Investment Trends" released by the Financial Supervisory Service on the 12th, foreign investors net redeemed 31 billion KRW worth of domestic listed bonds last month. They also net sold 2.548 trillion KRW worth of listed stocks. As of the end of last month, foreigners held a total of 749.4 trillion KRW in listed securities, including 598.4 trillion KRW (30.3% of market capitalization) in listed stocks and 151 trillion KRW (7.5% of outstanding amount) in listed bonds.

Foreign investment in domestic bonds turned to net redemption for the first time since December last year. Last month, foreign investors net purchased 8.357 trillion KRW worth of domestic listed bonds in the bond market, but with a record-high maturity repayment of 8.388 trillion KRW, a net redemption of 31 billion KRW occurred. This marked a reversal from the net investment trend that had started in January to net redemption after eight months.

By region, net investment was made in Asia (400 billion KRW) and the Middle East (300 billion KRW), while net redemption occurred in Europe (700 billion KRW) and the Americas (100 billion KRW). In terms of holdings, Asia accounted for the largest share with 70.7 trillion KRW, representing 46.8% of total foreign investment, followed by Europe (46.8 trillion KRW, 31.0%) and the Americas (11.9 trillion KRW, 7.9%).

By bond type, net investment occurred in government bonds (400 billion KRW), whereas net redemption took place in Monetary Stabilization Bonds (2.3 trillion KRW). The outstanding balance was dominated by government bonds at 120.9 trillion KRW, accounting for 80.1%, with special bonds recording 30 trillion KRW (19.9%). By remaining maturity, net investment was made in bonds with 1 to less than 5 years (3.3 trillion KRW) and over 5 years (1.1 trillion KRW), while net redemption occurred in bonds with less than 1 year (4.4 trillion KRW).

Foreign investors also continued their selling trend in domestic stocks for the second consecutive month following August. Last month, foreigners net sold a total of 2.548 trillion KRW, including 2.539 trillion KRW in the KOSPI market and 9 billion KRW in the KOSDAQ market, marking two consecutive months of net selling.

By region, net purchases were made in Europe (900 billion KRW), the Americas (500 billion KRW), and the Middle East (100 billion KRW), but a large-scale net sale occurred in Asia (4.3 trillion KRW). By country, Luxembourg (600 billion KRW) and the United States (400 billion KRW) were net buyers, while Singapore (4.3 trillion KRW) and Switzerland (300 billion KRW) were net sellers.

In terms of holdings, the United States accounted for 249.8 trillion KRW, representing 41.8% of total foreign holdings. This was followed by Europe with 179.5 trillion KRW (30.0%), Asia with 77.9 trillion KRW (13.0%), and the Middle East with 22.5 trillion KRW (3.8%).

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