Foreign investment in bonds skyrockets in ’07
Foreigners net purchased 31.7 trillion won ($33 billion) worth of local bonds last year, 4.9 times the amount in 2006, according to the Korea Securities Dealers Association yesterday.Around 97 percent of the bonds purchased by foreign investors last year were government bonds and monetary stabilization bonds. Only 3 percent were private bonds, the association of local brokerages said.
The association said foreigners bought 38.6 trillion won worth of bonds and sold 6.9 trillion won worth last year.
The total for bond sales and purchases by foreigners, 45.4 trillion won, rose 73.5 percent from 26.2 trillion won in 2006. Foreigners bought 16.3 trillion won worth of bonds and sold 9.8 trillion won in 2006.
Among the bonds net purchased by foreigners, 21.1 trillion won worth, or 66.6 percent, were government bonds, and 9.8 trillion won, or 30.8 percent, were monetary stabilization bonds.
Of the bonds, 15.9 trillion won worth had terms of three years or less.
“Foreigners bought short-term bonds in bulk to make the most of carry trades,” said an official at the association on condition of anonymity.
Carry trades refer to investors earning from the spread between the value of dollars and the value of won in the Korean currency swap market by investing in bonds. The swap rate between the two currencies kept rising at the end of last year, leading more foreigners to buy bonds, the official said.
In November 2007, foreigners’ net purchase of local bonds rose almost fourfold from a month earlier.
The net purchase of local bonds by foreigners amounted to 8.5 trillion won in November, compared to 2.2 trillion won in October.
Meanwhile, 2.7 trillion won worth of the bonds net purchased by foreigners last year had terms of seven years or longer, the association said.
By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
with the Korea JoongAng Daily
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