Foreign investors pull nearly $20b from Korean securities for 8th straight month

Foreign investors pulled nearly $20 billion from Korean securities last month, marking eight consecutive months of net outflows. Rising global long-term interest rates and concerns over a slowdown in AI investment drove share funds back into net outflow territory within a month, while bond outflows reached their second-largest level on record.

According to data on international finance and foreign exchange market trends released by the Bank of Korea on Friday, foreign securities investment — covering both shares and bonds — recorded a net outflow of $19.97 billion in September. A net outflow means more foreign investment money left the Korean securities market than entered it.

Foreign funds have now posted net outflows for eight consecutive months since February. March saw a record net outflow of $36.55 billion.

The September net outflow was significantly larger than the $4.5 billion recorded in August.

Breaking down by securities type, share funds recorded a net outflow of $14.16 billion. That reversed the net inflow seen in August — the first in eight months — within a month.

The Bank of Korea said investor sentiment weakened due to rising global long-term interest rates and concerns over slowing AI investment, pushing flows back into net outflow territory.

Bond funds recorded a net outflow of $5.81 billion — the largest since March, when outflows hit a record $6.77 billion.

Bonds have now posted net outflows for three consecutive months since July.

The Bank of Korea attributed the widening outflow to maturing government bonds and sluggish reinvestment stemming from a reversal in short-term arbitrage incentives.

The credit default swap premium on Korean government bonds — based on the five-year foreign exchange stabilization bond — averaged 22 basis points in September, unchanged from the previous month. One basis point equals 0.01 percentage point.

The won-dollar exchange rate's daily fluctuation range and rate of change widened in September to 7.0 won and 0.52 percent, respectively, compared with 4.4 won and 0.31 percent the previous month.