More ‘China Money’ Flowing Into Korean Market
By Yoon Ja-young
Staff Reporter
Chinese institutional investors are showing signs of increasing their buying of Korean stocks and bonds, emerging as new buying forces in the Seoul capital market.
According to analysts, an international fund set up by JP Morgan Asset Management and Shanghai International Trust and Investment Corporation started investing in the Seoul bourse last month. The fund, set up in October to invest in bourses around the Asia Pacific region, bought some tens of billions of won worth of blue chip stocks in the Seoul bourse. It manages some 3 trillion won assets.
A Chinese fund investing in Korea and four other countries in Asia Pacific, set up by China International in October, drew some 3.7 trillion won.
Analysts estimate Chinese funds will knock on the doors of the Korean stock market harder. The Chinese government allowed setting up funds investing overseas to reduce liquidity in the country in September.
Korea Institute of Finance (KIF) said ``China money'' is likely to rise as a new buying power in the global capital market. ``China's trade surplus is expected to reach $250 billion this year, growing over 40 percent from $177.5 billion last year. Investment in stocks and direct investment by foreigners is also surging on high economic growth rate,'' the institute said.
It explained that the Chinese funds are heading overseas to enhance profitability, diversify risk, and control capital excess. ``It aims at lessening the revaluation pressure on the yuan and stopping the overheating of the economy and financial market on the continuous inflow of money,'' the institute said.
China can be a pillar to sustain the Korean stock market amid selling by other foreign investors. ``The scenario of China becoming a buying power in the Seoul bourse is probable,'' said Huh Jae-hwan, an economist at Tong Yang Investment Bank. He pointed out the enormous trade surplus in China.
``They have been investing part of it overseas, investing in hedge funds and private equity funds of the United States and Japan, or buying shares of global financial institutions. That was the beginning of their advancement overseas, and they can head toward Korea anytime.'' China's Ping An Insurance, for example, bought 4.18 percent stake in Fortis, a Belgian-Dutch financial group.
He said Korea is attractive for Chinese funds, as the market is mature compared with the Chinese market. ``As a part of a diversification strategy, they are likely to pick Korea as an advanced market in Asia.''
According to the Financial Supervisory Service (FSS), some 73.1 billion won from China is invested in the Seoul bourse as of last month, which compares with only 2.5 billion won last year. The fund from Hong Kong investing in Korean stocks stood at 2.8 trillion won, also surging greatly from 1.9 trillion won last year.
The bond market also saw a rumor last month of a Chinese bank investing in the Korean bond market. The FSS denied it. ``Market participants have expectations, but I can't be sure whether the Korean bond market should be attractive to Chinese,'' said Yang Jin-mo, an analyst at SK Securities. There are very few foreign investors in Korean bond markets, taking less than 1 percent of the total, according to Yang.