Foreign exodus continues

The tapering of the U.S. Fed’s stimulus program turns out to have affected the Korean market as foreign investment outflow continued for the fourth consecutive month with 3 trillion won ($2.8 billion) exiting in February, the Financial Supervisory Service (FSS) said yesterday.

Foreigners last month sold off 1.2 trillion won of stocks and 1.8 trillion won of bonds, bringing the foreign investors’ share of stock holdings to 32.2 percent, or 425.7 trillion won, and bond holdings to 6.6 percent, or 93.9 trillion won. Total foreign holdings of stocks and bonds are 519.6 trillion won.

In January, foreigners off-loaded 706 billion won in stocks on local bourses while net purchasing 655 billion won in bonds.

In the case of bonds, the financial regulator said net investment has turned to an outflow largely because of the largest maturity in four months. While 1 trillion won worth of bonds were bought in February, 2.8 trillion won in bonds matured.

Meanwhile, stocks continued to suffer a net outflow largely because of jitters over the U.S. Federal Reserve’s cutback of its bond buying program that began in December.

Although the Korean market didn’t suffer as much as other emerging markets, including India, Indonesia and several South American economies, disappointing economic indicators from the United States and China triggered some foreign investors to pull out.

With the lack of any momentum that could further push up the local stock market, the main bourse has remained in the 1,970 range or lower since it fell from 2,000 on the last day of 2013.

“Since every economic indicator, including companies’ performances and external risks, has been announced [lately], the volatility of the market has eased,” said Seo Myung-chan, market analyst at Kiwoom Securities. “Although market participants are hoping for momentum that would boost the market, [investors] would have to get used to a slow-moving economy.”

Last month, foreign investors bought 24.7 trillion won of shares but sold nearly 26 trillion won worth.

In the first two months of 2014, foreign investors’ net outflow from the securities markets amounted to more than 1.9 trillion won.

U.S. investors topped the list of foreigners withdrawing from both the stock and bond markets.

After buying a net 287 billion won of shares in the first month of the year, U.S. investors off-loaded 960 billion won worth of shares in February. Luxembourg investors withdrew 746 billion won, which is a slight drop from the 764 billion won they off-loaded in January.

The United States topped the list of foreigners holding the most stock in the local market at 168.9 trillion won, or nearly 40 percent of total investment. The British trailed with 37.8 trillion won, or 8.9 percent, followed by Luxembourg at 24.9 trillion won, or 5.9 percent.

Singapore investors bought the most shares last month, expanding their net purchase of 64.8 billion won of Korean stocks in January to 427.7 billion won the following month.

The United States, which also is the largest foreign holder of Korean bonds at 20 percent, was the biggest seller in February. America, which holds 18 trillion won worth of bonds, off-loaded 1.5 trillion won last month, including 932 billion won in bonds that matured.

China was the third-largest net seller in the bond market after Luxembourg, off-loading 161 billion won. China was the third-largest foreign holder of Korean bonds in February with a share of 12.9 percent after Luxembourg’s 15 percent. China owns more than 12 trillion won in bonds.

By LEE HO-JEONG [ojlee82@joongang.co.kr]