Foreigners Withdraw 2.7 Trillion Won from Korean Stock Market Last Month... Net Outflow for Two Consecutive Months

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Last month, foreigners withdrew nearly 2.7 trillion won from the Korean stock market.

According to the 'International Finance and Foreign Exchange Market Trends' released by the Bank of Korea on the 10th, foreign stock investment funds recorded a net outflow of 2.39 billion dollars in January. Based on the won-dollar exchange rate at the end of January (1118.8 won), this amounts to a withdrawal of 2.6739 trillion won.

This marks the second consecutive month of net outflows of foreign stock investment funds. This was influenced by increased volatility in the U.S. stock market and profit-taking sales.

Foreign bond investment funds in January (1.32 billion dollars) turned to a net inflow for the first time in five months, mainly due to public funds. Combining stocks and bonds, foreign securities investment funds recorded a net outflow of 1.07 billion dollars, with outflows exceeding inflows for two consecutive months.

The credit default swap (CDS) premium for the 5-year Korean government bond (Foreign Exchange Stabilization Fund bond) averaged 25 basis points (1bp = 0.01 percentage point) in January, rising from 21bp in December last year, marking an increase for the first time in three months compared to the previous month. CDS is a type of financial derivative that acts as insurance to compensate for losses when the issuing country or company defaults. Generally, if the economic risk of the country increases, the premium also rises.

The won-dollar exchange rate stood at 1118.8 won at the end of last month, up 32.5 won from the end of last year (1086.3 won). Although investment sentiment improved and South Korea's export indicators were favorable, the exchange rate rose significantly due to the increase in the U.S. dollar index and growing foreign exchange demand.

The average daily fluctuation of the won-dollar exchange rate in January was 3.8 won compared to the previous day, larger than December's 3.5 won.

Last month, the average daily foreign exchange transaction volume in the domestic interbank market was 28.49 billion dollars, an increase of 3.53 billion dollars from the previous month (24.96 billion dollars). The yield on the 10-year Korean government bond rose from 1.72% at the end of December last year to 1.77% at the end of January.

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