South Korea has suffered the largest outflow of foreign stock funds among Asian emerging markets since the start of the U.S. subprime mortgage meltdown last year, a report showed Sunday.
Foreign stock investors sold a net $32.3 billion worth of South Korean stocks between August 2007 and February this year, the biggest net sell among six Asian markets, according to the report by the Korea Institute of Finance.
During the cited period, foreign investors sold a net $3.4 billion in Taiwan, $2.5 billion in Thailand and $800 million in the Philippines, while they bought a net $4.2 billion in India and $1.9 billion in Indonesia, the report said.
The institute ascribed the sharp increase in the capital outflow from South Korea to its increased country risk and a fall in returns on investments in local stocks.
South Korea's net external credit stood at $34.8 billion at the end of 2007, down $71.8 billion from a year earlier.
The think tank said the government needs to manage surging foreign debts more positively to prevent South Korea's country risk from rising further.
In the wake of the increased net sell, foreign ownership of stocks traded on the local bourse has fallen around 30 percent from a peak of more than 40 percent.
In a separate report, the Financial Supervisory Service, South Korea's financial watchdog, said foreign investors owned 41.1 trillion won ($41.4 billion) worth of bonds listed on the local bourse as of March 26.
The amount was up slightly from 40.9 trillion won at the end of February, and foreign investors bought a net 4.6 trillion won worth of local bonds in March, marking the 25th consecutive month of net buying, it said.
Market watchers said foreign investors' continued net purchase of local bonds results from a yawning gap between interest rates in South Korea and the United States. South Korea's benchmark repo rate currently stands at 5 percent, compared with the U.S. federal funds rate of 2.25 percent. (Yonhap)