By Kang Seung-woo
Staff reporter
Despite increasing tensions on the Korean Peninsula and lingering euro zone fiscal problems, South Korea's bond market has experienced no difficulty in attracting foreign investors.
The Korea Financial Investment Association (KFIA) said Sunday that this month's net buying of local bonds by foreign investors totaled 7.45 trillion won ($6.26 billion) on Friday.
It is in stark contrast to the local stock market, which has suffered a net selling of 6.44 trillion won during the same period.
Analysts say that South Korean bonds are seen as safe assets thanks to the nation's sounder financial and economic status than the struggling euro zone countries.
"Instead of government bonds from industrialized nations, Korean bonds, which have high growth rates and sound financial conditions, have been emerging as new safe assets," said Woori Investment and Securities analyst Park Jong-yeon.
He is also said that the current problems in Korea and Europe are not at such a high level.
"To find how serious the current crises are, we are monitoring closely whether foreign investors sell bonds," said Kim Se-joong, a market analyst of Shinyoung Securities.
"If the situation gets worse, investors tend to sell all government bonds other than U.S. ones, but we are not at that level now."
The bond market remained unscathed, even in May, when the won-dollar exchange rate fluctuated between 1,100 won and 1,250 won due to the growing feud between the two Koreas.
It tallied a net buying of 251.7 billion won on May 20, when a multinational investigation concluded that the naval vessel Choenan was torpedoed by a North Korean submarine, and 1.64 trillion won was reported when President Lee Myung-bak said that the South would slash trade with its northern neighbor.
The heavy purchases had been steady before the investors recorded a net selling of 34.4 billion won Friday.
The total amount of bonds purchased by non-Koreans stands at 34.6 trillion won this year, accounting for 66.2 percent of last year's total of 52.4 trillion won.
Among them, the portion of long-term bonds with a maturity of three years or longer has been on the rise, representing almost half, or 47.2 percent. In January, it posted just 25.7 percent.