Foreigners Net Sell 2.2 Trillion KRW in Korean Stocks in February... Impact of Ukraine Crisis

As the Ukraine crisis prolongs, foreign investment in domestic stocks turned to a net outflow last month for the first time in four months.

According to the "International Finance and Foreign Exchange Market Trends" released by the Bank of Korea on the 11th, foreign investment in domestic stocks recorded a net outflow of $1.86 billion in February. Based on the won-dollar exchange rate at the end of February (1,202.3 won), this amounts to approximately 2.2362 trillion won.

Foreign stock investment funds had recorded net inflows for three consecutive months from November ($2.52 billion), December ($3.69 billion), and January this year ($1.81 billion) after a net outflow in October last year ($2.65 billion), but turned to a net outflow last month.

The Bank of Korea explained, "It seems that foreign stock investment funds have withdrawn due to weakened investor sentiment caused by the Russia-Ukraine crisis."

However, foreign bond investment funds recorded a net inflow of $3.49 billion. This marks the 14th consecutive month of the longest net inflow streak since January last year.

Accordingly, the total foreign securities investment funds, combining stocks and bonds, recorded a net inflow of $1.64 billion. This means that more money flowed into the Korean stock market than out. However, the scale of incoming funds significantly decreased compared to $4.97 billion in January.

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 points) last month, increasing by 3bp compared to January.

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

The average daily foreign exchange transaction volume in the domestic interbank market was $28.05 billion, down by $1.59 billion from the previous month ($29.64 billion).

The won-dollar exchange rate rebounded sharply in the latter part of last month due to heightened tensions from Russia's invasion of Ukraine and a surge in oil prices. The average daily fluctuation of the won-dollar exchange rate last month was 3.1 won, expanding compared to 2.6 won in January.

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