Foreign investors sell for 6th straight month as $21.65B exits in July

Foreign investment funds have recorded net outflows for six consecutive months, driven by geopolitical tensions in the Middle East and growing caution over global AI investment.

According to data on international finance and foreign exchange market trends released by the Bank of Korea on Thursday, foreign securities investment — covering both shares and bonds — posted a net outflow of $21.65 billion last month. A net outflow means more foreign investment funds left the Korean securities market than entered it.

Foreign funds have been in net outflow every month since February. The scale of the July outflow was, however, smaller than the $30.72 billion recorded in June.

Breaking down by asset class, equity funds saw a net outflow of $20.7 billion last month, extending seven consecutive months of net outflows since January. The outflow was nonetheless smaller than June's record $32.37 billion.

The Bank of Korea said equity funds recorded net outflows due to heightened geopolitical tensions in the Middle East and caution surrounding global AI investment, but added that the pace of outflows eased as rebalancing sell-offs moderated following a domestic share price correction.

Bond funds also saw $960 million leave the market, reversing three consecutive months of net inflows from April through June. The Bank of Korea said the shift to net outflows reflected a widening reversal in short-term arbitrage incentives.

The credit default swap premium on South Korean government bonds — based on the five-year foreign exchange stabilization bond — held steady at a monthly average of 23 basis points (1 bp = 0.01 percentage point), unchanged from the previous month.

The won-dollar exchange rate's daily fluctuation range and rate of change in July widened to 8 won and 0.53 percent, respectively, compared with 7.6 won and 0.50 percent in June.