Foreigners Withdraw 4.7 Trillion Won from Stock Market in March... Securities Investment Funds Turn Net Outflow After 5 Months

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[Asia Economy Reporter Seo So-jung] Due to the Ukraine crisis and the tightening moves of the U.S. Federal Reserve (Fed), foreign stock funds have been withdrawn, turning foreign investment in domestic securities into a net outflow in March for the first time in five months.

According to the "International Finance and Foreign Exchange Market Trends" announced by the Bank of Korea on the 13th, the total foreign investment in securities, combining stocks and bonds, recorded a net outflow of 3.39 billion dollars in March.

In particular, foreign investment in domestic stocks saw a net outflow of 3.93 billion dollars, marking a net outflow for two consecutive months. Based on the won-dollar exchange rate at the end of March (1,212.1 won), approximately 4.7635 trillion won was withdrawn. The net outflow widened compared to February (-1.86 billion dollars) due to increased geopolitical risks related to Ukraine.

Foreign investment in bonds recorded a net inflow of 540 million dollars, marking 15 consecutive months of net inflows since January last year. However, the net inflow of bond funds narrowed due to factors such as the reduction in domestic-foreign interest rate differentials.

The credit default swap (CDS) premium for the 5-year Korean government bond (Foreign Exchange Equalization Fund bond), which indicates national credit risk, rose slightly to 0.30 percentage points from 0.27 percentage points the previous month. A higher CDS premium means an increased risk of default.

Regarding the won-dollar exchange rate, it rose due to expectations of stronger Fed tightening and weakened investor sentiment amid the ongoing Russia-Ukraine crisis. The daily volatility rate of the won-dollar exchange rate in March was 0.56%, significantly higher than 0.26% in the previous month.

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