Overseas investors increased holdings of South Korean shares last month by the most on record, while pulling money from local-currency bonds, data today from the financial regulator showed.
The amount of equities owned by foreign funds rose by 6.6 trillion won ($5.8 billion) to 383.9 trillion won, the Financial Supervisory Service said in an e-mailed statement today. That is equivalent to 31 percent of shares listed on Korea Exchange. Speculation that the Federal Reserve will embark on another round of monetary stimulus and the European Central Bank will act to resolve the region’s debt crisis spurred demand for Korean equities, according to the FSS.
Funds based in the U.K. were the top buyers of Korean shares in August, with net purchases amounting to 3 trillion won, followed by France and Singapore, today’s statement showed. U.S. investors were the biggest sellers, ahead of those in Luxembourg and Switzerland. The Kospi index of shares rose 1.2 percent last month.
The value of won-denominated debt owned by overseas investors fell by 2.6 trillion won to 86.9 trillion won, the biggest monthly decline this year, according to the FSS. Holdings decreased as 2.8 trillion won of bonds held by foreigners matured and a bond market rally encouraged investors to lock in profits, the statement said.
U.S. investors were the biggest sellers, with ownership falling by 962 billion won, followed by those in Thailand and France, according to FSS data. Norwegian funds were the top net buyers, adding 450 billion won, while those in Switzerland and China raised holdings by 408 billion won and 185 billion won, respectively, FSS data show.
The yield on the government’s benchmark five-year bonds dropped 11 basis points to 2.86 percent in August, a fifth straight monthly drop, according to data compiled by Bloomberg. That’s the longest run of declines since 2004. The won weakened 0.4 percent to 1,134.63 per dollar.
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