Foreign investment rises 258% month on month

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Foreign investment rises 258% month on month

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Foreigners made a total 4.3 trillion won ($3.9 billion) worth of investments in Korean shares and listed bonds in March, up 258% percent from February owing to the ample liquidity created by quantitative easing measures in advanced economies.

According to a report by the Financial Supervisory Service on Monday, foreigners made up to 2.9 trillion won in purchases of Korean securities shares listed on the stock market and 1.4 trillion won worth of listed bonds last month.

As of March, foreigners owned 452 trillion won in local shares, which accounted for 30.8 percent of the entire market capitalization. They possessed 102.6 trillion won in listed bonds, or 6.9 percent of the total.

Americans became the largest investors with 1.3 trillion won in Korean shares. Switzerland invested 500 billion won and the United Kingdom followed with 400 billion won.

Saudi Arabia was at the top in January, making about 471 billion won in investments. Switzerland was the biggest in February with about 590 billion won, data shows.

Chinese investors remained the largest Korean bond holder for the third consecutive month, buying about 743 billion won worth of local bonds in March. Chile is the second with about 338 billion won.

Thanks to the influx of foreign capital, the Korean securities market has rallied nearly 9 percent since early this year.

Other major stock markets around the world are enjoying high global liquidity, said Jeon Ji-won, an analyst at Kiwoom Securities.

“Until there are signs from the U.S. Federal Reserve of its tapering, global rallies will continue,” Jeon said. “As the foreign buying spree gets stronger in the Korean market, large-cap shares that have been showing slow growth might rebound.”

When funds from advanced economies in the West flowed into emerging markets, their first destination used to be Japan before they looked for some Asian commodity exporters. But considering the sluggish commodity market nowadays, those funds are heading to commodity importers these days, she said.

“Usually, Korea is the third to be considered after India and China,” Jeon said.

According to an official forecast by KDB Daewoo Securities, the largest securities firm in the country, the Kospi will surpass 2,100 due to the increasing global liquidity before the Fed’s rate hike.

But some market observers are concerned about bubbles being created in the Korean market, led by the foreign buying spree. Last week alone foreigners purchased as much as 560 billion won worth of Korean shares, beating foreign buying in India and Thailand.

“It is true that as foreign buying is creating an upbeat atmosphere in the Korean market, there are risks of bubbles, too,” said Han Yo-seob, an analyst at KDB Daewoo Securities.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]
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