Foreign investors shed holdings

Foreign investors last month sold off both stocks and bonds in the local market as their attention shifted to safe assets in response to declining crude oil prices and the possibility of Greece leaving the European Union.

According to the Financial Supervisory Service (FSS) on Thursday, foreign investors in December net sold 1.9 trillion won ($1.7 billion) worth of Korean stocks and 117 billion won in bonds.

In November, foreigners were net buyers of stocks and bonds, purchasing 2 trillion won worth of stock alone.

By country, U.S. investors were the biggest net sellers as they off-loaded 667.5 billion won in shares. The British were close behind at 569.7 billion won, followed by Saudi Arabians at 263.7 billion won.

Japanese investors were the biggest net buyers of Korean stocks, purchasing 188.4 billion won worth of shares. Investors from Norway were net buyers of 85.4 billion won and the Netherlands 80.2 billion won.

Americans remain the largest group of foreign stock owners, accounting for 38.8 percent or 164.3 trillion won. The British are the second-largest group with 37.5 trillion won and Luxembourgians third with 25.7 trillion won.

As of December, foreign investors held 423 trillion won in shares, 15.5 trillion won less that the previous month. This is a 3.5 percent drop from the previous month.

Foreign investors now own 31.2 percent of stocks in the Korean market, compared to 31.8 percent in November.

Foreign investors last month also were net sellers in the bond market, off-loading 117 billion won.

It was the first time in four months they were not net buyers.

The biggest sellers were from Malaysia, dumping 756.3 billion won worth of bonds, followed by Singaporeans with 329.7 billion won and Americans with 245.9 billion won.

Chinese remained the largest net buyers, as they were in November. In December, they net purchased 566.6 billion won. The British (198.3 billion won) and Kuwaitis (175 billion won) also were net buyers.

The total value of bonds owned by foreign investors in December was 100.4 trillion won. U.S. investors held 18.6 percent, or 18.7 trillion won, followed by the Chinese at 14.7 trillion won and Luxembourgians with 12 trillion won.

The FSS cites falling prices for crude oil and mounting concerns about Greece leaving the European Union as triggers for foreign investors to sell off riskier investments.

However, it noted the off-loading was not at a level where it is a cause for concern.

The gradual exit of foreign investors is likely to continue this month and could extend through the first half of the year as the global oil market shows few indications that prices will stabilize anytime soon.

Some analysts say that low crude prices will persist for the near term, exerting an influence on stock markets in Korea and other emerging economies.

“Because there are political motives behind oil supplies involving players like Saudi Arabia and the United States, it seems inevitable that low crude prices will continue for the time being,” said Cho Byung-hyun, market analyst at Yuanta Korea. “In the mid to long term, falling crude prices will have a positive effect [on the economy], but the reason why it is having a negative effect on the local stock market is because in the short term it is reducing the appeal of emerging markets and further exacerbating concerns about deflation.”

Chun Jung-hoon, an analyst at Kiwoom Securities, agreed that current low crude prices and the strengthening U.S. dollar will continue for the time being. However, he projected the price of West Texas Intermediate (WTI) crude could fall below $40 per barrel, adding it would be unlikely to fall further than that.

“There haven’t been any signs of the situation being resolved either on the supply or the demand side,” the analyst said.
ojlee82@joongang.co.kr [BY LEE HO-JEONG]