In December, Foreign Investors Withdraw 3.06 Trillion Won from Domestic Securities... Net Outflow After Three Months

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] In December last year, foreign investment funds in domestic securities turned to net outflow after three months. This was due to a decrease in the inflow of stock funds amid tightening concerns by major central banks such as the U.S. Federal Reserve (Fed), as well as the shift of bond funds to net outflow.

According to the "International Finance and Foreign Exchange Market Trends" announced by the Bank of Korea on the 12th, foreign investment funds in securities (stocks and bonds) recorded a net outflow of $2.42 billion last month. Applying the won-dollar exchange rate of 1,264.5 won as of the end of December, this amounts to approximately 3.06 trillion won.

In September, foreign investment funds recorded a net outflow of $2.29 billion. Afterwards, net inflows were recorded in October ($2.77 billion) and November ($2.74 billion), but last month, it turned back to net outflow.

By type of securities, foreign stock investment funds showed a net inflow of $310 million. Stock funds continued a net inflow trend for three consecutive months through October ($2.49 billion), November ($2.1 billion), and December, but the scale of inflows decreased due to ongoing tightening concerns by major central banks.

Last month, foreign bond investment funds recorded a net outflow of $2.73 billion. The Bank of Korea explained, "In the case of bond funds, the increase in maturity amounts and the reduction of arbitrage incentives caused funds to flow out, turning to net outflow after three months."

The credit default swap (CDS) premium for Korean government bonds (based on the 5-year Foreign Exchange Stabilization Fund bonds) averaged 53 basis points (1bp=0.01 percentage point) in December. This is a declining trend since October (61bp).

Last month, the short-term and medium- to long-term borrowing spreads of domestic banks (based on eight banks including Kookmin, Shinhan, Woori, Hana, Nonghyup, Industrial, Export-Import, and IBK) decreased compared to November. The short-term borrowing spread against LIBOR was -1bp in December, down 20bp from 19bp in November. The medium- to long-term borrowing spread fell from 97bp to 54bp.

The won-dollar swap rate, which shows foreign currency liquidity conditions, was -1.19% as of the 10th of this month, down 5bp from -1.14% at the end of November.

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