Foreigners' net selling of Korean shares hits record $31.8B in May

By Kim Byeo-ri, The Herald Business

Foreign investors posted a record net $31.83 billion in share selling on the South Korean stock market last month, while total net securities outflows reached $26.15 billion — the second-largest on record.

The figures come from the Bank of Korea's international finance and foreign exchange market report released Monday. The $26.15 billion net outflow means more foreign investment money left South Korea's stock and bond markets combined than entered them in May.

The May outflow was the second-largest ever, trailing only the $36.55 billion recorded in March. Measured in won at the end-of-May exchange rate of 1,507.9 won per dollar, the outflow amounted to roughly 39.43 trillion won. It also marked the fourth consecutive month of net outflows since February.

On a cumulative basis, foreign investors have pulled a net $70.2 billion from South Korean securities markets through May this year.

Breaking down by asset class, equities accounted for the bulk of the outflow. Foreign investors sold a net $31.83 billion in Korean shares last month — the largest single-month figure on record and the fifth consecutive month of net selling since January.

Bonds, by contrast, saw a net inflow of $5.68 billion, extending a two-month streak of net inflows after a $550 million net inflow the previous month.

The Bank of Korea attributed the record equity outflow to portfolio rebalancing as domestic share prices rose, along with profit-taking sales. On the bond side, it said inflows were driven by funds tracking the World Government Bond Index and bargain buying as market interest rates climbed.

The credit default swap premium on South Korean government bonds — based on the five-year foreign exchange stabilization bond — averaged 25 basis points in May, down 6 basis points from 31 basis points the previous month. One basis point equals 0.01 percentage point.

The average daily fluctuation in the won-dollar exchange rate narrowed in May, with the rate moving an average of 6.6 won, or 0.45 percent, against the previous day's close — down from 8.9 won and 0.59 percent in April. The Bank of Korea said the won came under upward pressure from heightened uncertainty in the Middle East and foreign net selling of domestic shares, but gains were pared after the government issued market-stabilizing messages and news emerged that the national pension fund had sold forward-dollar contracts.