Foreign investors rush to sell local stocks, bonds

By Kim Jae-won

Foreign investors rushed to sell Korean stocks and bonds in January, extending their net selling streak for an eighth month as the country’s local currency continued to lose its value against the U.S. dollar, central bank data showed Wednesday.

The Bank of Korea (BOK) said that foreigners’ net selling in local securities reached $4.5 billion in January, up from $4 billion a month earlier. Net selling in stocks marked $2.5 billion while that of bonds was $2 billion.

Analysts said that foreign investors are pulling their money out of Asia’s fourth-largest economy largely due to expectations about a U.S. Federal Reserve interest hike and the declining value of the Korean won.

“Foreign investors cut their investments in the local market as they expect the U.S. to raise its interest rate,” said Lee Seul-bi, an analyst at Kyobo Securities. “A rising won-dollar exchange rate is also driving them to dump their stocks and bonds here.”

But, Lee said that such a trend is changing as of mid-February, as foreigners are turning to buy local securities. Swiss and Australian central banks are buying Korea’s sovereign bonds with a long duration, betting on the country’s economy to revive in the long term.

Korea’s current account surplus narrowed from January as the country suffered a slump in exports and a widening of its service sector deficit, according to BOK data.

The current account surplus came to $7.06 billion last month, compared with a revised $7.38 billion surplus the previous month, the central bank said. From the same month a year earlier, the January tally, however, marks a 12.8 percent spike. It also marked the 47th consecutive month of a surplus.

The month-on-month drop was largely attributed to a cut in the goods account surplus, which plunged to $8.11 billion from the previous month’s $10.68 billion.

The nation posted an 18.8 percent year-on-year drop in its outbound shipments in January amid waning global demand and low oil prices. The deficit in the service account widened from $1.7 billion in December to $1.9 billion last month despite a $20 million surplus in the intellectual property account, marking a turnaround from a $220 million deficit the previous month.

The primary income account shifted to a surplus from a revised $590 million deficit in December.

“The primary income account reversed from its 600 million deficit the month before to a surplus of $1.25 billion, in line with a decrease in equity account payments,” said Hwang Sang-pil, a BOK director, in a press briefing.