Foreign Stock Investment Sees Net Outflow for 2nd Month... Impact of China's Economic Slowdown and Semiconductor Recovery Delay

Last month, foreign investment funds in domestic stocks experienced net outflows for the second consecutive month due to concerns over the slowdown in the Chinese economy and delays in the recovery of the semiconductor industry.

According to the "International Finance and Foreign Exchange Market Trends since September 2023" released by the Bank of Korea on the 13th, foreign securities investment funds recorded a total net outflow of $1.43 billion last month.

Among securities investment funds, stock funds saw a net outflow of $1.33 billion. In August, there was a net outflow of $1.7 billion.

Bond funds also experienced a net outflow of $100 million, but the scale of net outflow decreased compared to the previous month ($790 million). The Bank of Korea explained, "Despite a large amount of maturities, reinvestment of funds proceeded smoothly."

The average KRW-USD exchange rate rose from 1,321.8 won in August to 1,349.3 won in September, an increase of 27.5 won, which was a smaller rise compared to the previous month’s increase of 47.2 won. As of the 11th of this month, the rate stands at 1,338.7 won. The Bank of Korea stated, "Although the KRW-USD exchange rate increased due to the strength of the US dollar, the rise was limited thanks to improvements in domestic foreign exchange supply and demand, such as the expansion of South Korea’s trade surplus." The easing of the US dollar’s strength following the outbreak of war between Israel and the Palestinian militant group Hamas also had an impact.

The volatility of the KRW-USD exchange rate decreased compared to the previous month. During September, the daily fluctuation in the KRW-USD exchange rate was 3.5 won, down from 5.5 won in August, and the volatility rate was 0.26%, lower than August’s 0.41%.

In September, the average daily foreign exchange transaction volume in the domestic interbank market was $30.9 billion, a decrease of $4.03 billion compared to the previous quarter ($34.93 billion).

The credit default swap (CDS) premium for Korean government bonds (based on the 5-year Foreign Exchange Stabilization Fund bonds) averaged 32 basis points (1 bp = 0.01 percentage points) in September, up 1 bp from 31 bp in the previous month.

CDS are financial derivatives that act as insurance to compensate for losses when the issuing country or company defaults. When the economic risk of the country increases, the premium tends to rise.

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