Investors rush to bonds amid sluggish market

Around 11 trillion won ($9.08 billion) in cash has been funneled into funds this year that mostly invest in bonds amid increased uncertainty and hopes for rate cuts, while investors pulled some 300 billion won out of stock funds, data showed Sunday.

As of Thursday, some 270 bond funds had 34.05 trillion won worth of assets under management, up 11.28 trillion won from the end of last year. The comparable figure for stock funds reached 54.97 trillion won, down 304 billion won over the cited period, according to the data.

Increased economic uncertainty, stemming from the escalating China-U.S. trade dispute, along with another trade conflict between Seoul and Tokyo, has prodded investors to park their money in the safer bond funds.

Also, the prospect of rate cuts in Korea and other major economies fueled cash inflows into the bond funds, according to analysts.

Korea’s exports have dropped for eight consecutive months, since December, and are tipped to continue their losing streak in August, with outbound shipments plunging 13.3 percent on-year in the first 20 days of the month.

The Bank of Korea (BOK) again slashed its growth outlook to 2.5 percent in April, then to 2.2 percent last month.

Against such a backdrop, the BOK’s monetary policy board made a surprise move to cut the base rate by 25 basis points to 1.5 percent in its latest meeting held July 18, marking its first rate cut in more than three years.

The BOK board is set to hold its next rate-setting meeting Friday.

Yonhap