By Kang Seung-woo
Foreign investors are actively buying Korean government bonds as their holdings hit a record high last month, data showed Wednesday.
According to the latest figures from the Financial Supervisory Service (FSS) and Korea Financial Investment Association (KOFIA), the amount of listed government bonds held by foreigners reached 63.63 trillion won ($56.43 billion) as of the end of November, accounting for 16 percent of the total government bond ownership of 394.82 trillion won.
The figure marks the highest level since the bond market was opened to overseas investors in 1998.
Foreign holdings of government bonds have been on the increase since the global financial crisis.
After standing at 9.2 percent in 2007, ownership reached 13.3 percent at the end of last year, according to the data.
In addition, foreign investors’ purchase of government bonds takes up a large part of the overall financial foreign ownership, including currency and special and corporate bonds, representing 64.4 percent last year. The figure jumped to 72.8 percent in November this year.
The data also revealed that Asian investors from China and Malaysia have beefed up their holdings of Korean government bonds, as the nation’s economy has steadily grown on the back of its solid fundamentals.
China’s buying has taken off steeply over the past few years as its holdings have increased nearly 83 times from 79.6 billion won in 2008 to 6.56 trillion won in 2010.
Malaysian investors’ government bond ownership reached 4.28 trillion won at the end of last year, skyrocketing nearly 126 times over the cited period.
The United States was the largest holder of listed bonds worth 18.84 trillion won, followed by Luxembourg and Thailand, which owned 14.15 trillion won and 10.94 trillion won worth, respectively, the data said.
China and Malaysia rounded out the top five with 10.19 trillion and 7.88 trillion won, respectively.
However, market watchers warn that the local markets may be hit hard in times of global financial turmoil that forces foreign investors to abruptly withdraw their money.
According to the Bank of Korea (BOK), foreign investors in bonds scramble to exit local markets when crises loom.
“Overseas investment, heavily intent on government and currency bonds, go through maturity and swaps every six months, which can see funds depart,” said a Seoul-based economist.