Foreign Investors' Net Securities Investment Inflow of $4.4 Billion in January... Increasing for 3 Consecutive Months

Expectations for Semiconductor Market Recovery and Resumption of Institutional Investment

On the 23rd, the KOSPI started with a slight increase, while the KOSDAQ rose before slightly falling. The won-dollar exchange rate rose slightly. Employees are working in the dealing room of Hana Bank in Myeongdong, Seoul. Photo by Younghan Heo younghan@

Since January, net inflows of foreign investment funds into domestic securities have increased in both stocks and bonds. This is due to ongoing expectations of a recovery in the semiconductor industry despite concerns over the delayed interest rate cuts by the U.S. Federal Reserve (Fed), as well as the resumption of investments by overseas institutions at the beginning of the year.

According to the "International Finance and Foreign Exchange Market Trends since January 2024" released by the Bank of Korea on the 13th, foreign investment funds in securities totaled a net inflow of $4.4 billion last month. Following net inflows of $4.5 billion in November and $1.72 billion in December of last year, this marks the third consecutive month of increase.

Among securities investment funds, stock funds recorded a net inflow of $2.51 billion. Stock funds have remained positive since November last year ($2.64 billion). The Bank of Korea explained, "Despite concerns over the Fed's delayed policy rate cuts, significant net inflows occurred due to continued expectations of a recovery in the semiconductor industry."

Bond funds turned from negative to positive. Last month, bond funds saw a net inflow of $1.89 billion, reversing the net outflow of $790 million in December last year. The Bank of Korea stated, "The net inflow trend reversed as overseas investment institutions resumed investments at the beginning of the year."

The average daily foreign exchange transaction volume in the domestic interbank market (based on foreign exchange brokerage firms) in January was $37.13 billion, an increase of $4.37 billion compared to the previous month ($32.76 billion).

Among external foreign currency borrowing conditions, the CDS premium (based on 5-year foreign exchange stabilization bonds), which indicates national credit risk, slightly rose to 29 basis points in January from 27 basis points in the previous month. CDS are financial derivatives that act as insurance compensating for losses in case of default by a country or corporation, and their values increase when national economic risks rise.

The average KRW-USD exchange rate rose from 1,288 won in December last year to 1,334.6 won in January, then the rate of increase slowed to 1,327.8 won as of the 7th. The Bank of Korea explained, "The exchange rate rose due to the strength of the dollar, but the increase was limited by net inflows of foreign stock funds and increased dollar selling by export companies."

The volatility of the KRW-USD exchange rate significantly decreased compared to the previous month. The daily fluctuation in the KRW-USD exchange rate in January was 4.5 won, smaller than December's 7.6 won. The volatility rate was 0.34%, down from 0.58% in December. The Bank of Korea explained, "In December, volatility increased around the Fed's Federal Open Market Committee (FOMC) meetings, but this year, as expectations for early Fed rate cuts steadily weakened, volatility has decreased."

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