Foreigners Bought 208.7 Billion KRW of Domestic Stocks in July... Net Inflow After 6 Months

[Image source=Yonhap News]

Due to expectations of a slowdown in the pace of tightening by the U.S. Federal Reserve (Fed), foreign investors purchased approximately 208.7 billion KRW worth of stocks in the domestic stock market last month.

According to the International Finance and Foreign Exchange Market Trends announced by the Bank of Korea on the 11th, foreign investment funds in domestic stocks recorded a net inflow of 160 million USD in July.

Based on the KRW-USD exchange rate at the end of last month (1,304.6 KRW), this amounts to about 208.7 billion KRW.

This is the first net inflow of foreign investment funds into domestic stocks in six months since January.

The Bank of Korea explained, "The net inflow turned positive as investment sentiment improved due to expectations of a slowdown in the Fed's tightening pace and better-than-expected earnings from major U.S. companies."

Foreign investment funds in bonds recorded a net inflow of 3.54 billion USD.

The net inflow of bond investment funds has continued for 19 months, marking the longest record ever. The inflow amounts have been increasing, with 470 million USD in April, 2.06 billion USD in May, and 2.23 billion USD in June.

With stock investment funds turning to net inflow and the scale of net inflow in bond investment funds expanding, the total foreign securities investment funds in July turned to a net inflow of 3.7 billion USD after one month.

(Data provided by Bank of Korea)

The credit default swap (CDS) premium on South Korea's government bonds (based on the 5-year Foreign Exchange Stabilization Fund bonds) averaged 50 basis points (1 bp = 0.01 percentage points) last month, which is 2 bp higher than in June.

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

Although the CDS premium continued a gradual upward trend, the Bank of Korea explained, "Looking at the monthly trend, the premium was above 50 bp in early July, dropped to 40 bp by the end of July, and as of the 9th of this month, it stands at around 39 bp."

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