Global Investors Cut Korea Stock Holdings, Boost Bond Ownership

Global funds reduced ownership of South Korean stocks by the most since August last month while boosting holdings of local-currency bonds as Europe’s debt crisis spurred demand for the safest assets.

International investors, led by funds in the U.K., Luxembourg and France, reduced ownership of equities by 3.4 trillion won ($2.9 billion), the Financial Supervisory Service said in an e-mailed statement today. Their holdings were 367.8 trillion won at the end of May, accounting for 31.4 percent of shares listed on the Korea Exchange. The Kospi (KOSPI) Index fell 7 percent in May, the biggest monthly loss since August.

Global funds increased holdings of South Korean bonds by 630.2 billion won to 88.5 trillion won last month after pulling money in April. Investors based in Switzerland were the biggest buyers, ahead of Luxembourg and Hong Kong, with total ownership increasing by 617.9 billion won. U.S. investors were the top sellers, cutting holdings by 572 billion won, followed by the U.K. and China.

Yields on South Korea’s three-year government bonds declined 12 basis points, or 0.12 percentage point, to 3.33 percent last month, Korea Exchange Inc. prices show. The won retreated 4.3 percent in May to 1,180.33 per dollar, according to data compiled by Bloomberg.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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