Global Funds Boost Holdings of Korean Stocks, Bonds to Record

Foreign investors boosted their holdings of South Korean bonds and stocks to an all-time high in February, with Chinese funds taking up a record amount of shares.

Ownership of local-currency debt rose by 3.5 trillion won ($3.2 billion), the biggest monthly increase since October 2010, to 93.7 trillion won, according to an e-mailed statement from the Financial Supervisory Service today. Stock holdings increased by 1.5 trillion won to 421.2 trillion won.

Prospects for appreciation in the won and the possibility of an interest-rate cut by the central bank drove the bond purchases, the FSS said in a statement. The currency climbed 0.5 percent in February, the second-best performance among Asia’s 11 most-traded exchange rates. It reached 1,076.23 per dollar on Feb. 20, the strongest level since Jan. 25, and traded at 1,087.04 late yesterday, data compiled by Bloomberg show.

Chinese investors bought a net 1.2 trillion won of South Korean equities, the report shows. Norwegian funds were net buyers for a third month, led by government entities.

The benchmark Kospi (KOSPI) stock index gained 3.3 percent in February after dropping 1.8 percent in January. It has since declined 0.5 percent to 2,016.61 yesterday.

The Bank of Korea kept its benchmark policy rate at 2.75 percent in February, after cutting it in October. The central bank next meets on March 14.

The yield on the government’s three-year bonds declined 14 basis points, or 0.14 percentage point, to 2.63 percent last month, according to data compiled by Bloomberg.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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