Aftermath of Martial Law... Foreign Securities Net Outflow of 5.6 Trillion Won in December, Largest Since COVID-19

Employees at the Hana Bank dealing room in Jung-gu, Seoul are working. Photo by Jo Yong-jun

Due to political instability, foreign investors withdrew the largest amount of funds from the domestic securities market since March 2020, during the COVID-19 pandemic.

According to the Bank of Korea's "International Financial Foreign Exchange Market Trends since December" report on the 15th, foreign investors' net outflow from the domestic stock and bond markets in December amounted to $3.86 billion (approximately 5.63 trillion KRW), the largest since the $7.3 billion recorded in March 2020.

March 2020 marked the beginning of the COVID-19 pandemic, a period of severe social turmoil. Last month, domestic political turmoil was identified as the main cause of foreign securities fund outflows.

Foreign investors withdrew $2.58 billion from the stock market and $1.28 billion from the bond market. A Bank of Korea official explained, "Concerns over the growth potential of domestic semiconductor companies persist, and amid domestic political uncertainty and worries about delays in global interest rate cuts, net outflows from the stock market continued."

Due to domestic political instability and the strengthening of the US dollar, the value of the Korean won also fell sharply. The won-dollar exchange rate, which was around 1,394 KRW at the end of November last year, surged to 1,472 KRW by the end of December. The average daily exchange rate volatility also rose from 4.7 KRW in November to 5.3 KRW in December.

A Bank of Korea official assessed, "The exchange rate rose sharply due to the Federal Reserve's (Fed) hawkish stance, strong employment indicators leading to a stronger US dollar, and the highlighting of domestic political uncertainty."

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