Foreign Stock Investment Funds by Foreigners Net Inflow for 3 Consecutive Months... Growth Rate Slows Down

[Image source=Yonhap News]

In the domestic securities market, the net inflow of foreign investment funds continued for three consecutive months, influenced by a series of large initial public offerings (IPOs). However, the inflow slowed somewhat due to the normalization of monetary policies in major countries, including the tightening moves by the U.S. Federal Reserve (Fed).

According to the "International Finance and Foreign Exchange Market Trends" report released by the Bank of Korea on the 10th, foreign investment in domestic stocks last month recorded a net inflow of $1.81 billion. Based on the won-dollar exchange rate at the end of January (1,205.5 won), this amounts to approximately 2.182 trillion won.

A Bank of Korea official explained, "Despite concerns about the acceleration of monetary policy normalization in major countries and geopolitical risks, the large influx of investment funds through IPOs prevented a shift to net outflows." The success of the LG Energy Solution IPO is interpreted as having influenced foreign investment trends.

Accordingly, foreign stock investment funds recorded net inflows for three consecutive months starting from November, following a net outflow of $2.65 billion in October last year. However, the inflow amount in January was less than half of the $3.69 billion recorded in December last year.

Foreign bond investment funds saw a net inflow of $3.16 billion, marking 13 consecutive months of net inflows since January last year. The total foreign securities investment funds, combining stocks and bonds, recorded a net inflow of $4.97 billion.

The credit default swap (CDS) premium on the 5-year Korean government bond (Foreign Exchange Equalization Fund bond), which indicates the country's credit risk, rose slightly to 0.23 percentage points from 0.21 percentage points the previous month. A higher CDS premium means an increased risk of default.

Regarding the won-dollar exchange rate, it rose due to strengthened expectations of accelerated tightening by the U.S. Federal Reserve and geopolitical instability between Russia and Ukraine. However, the recent interest rate hike by the Bank of England and inflation concerns expressed by the European Central Bank (ECB) president led to a decline in the U.S. dollar index, somewhat reducing the extent of the rise.

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