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Foreigners Cut Korea Bond Holdings by Most in a Year, Buy Stocks

Overseas investors cut their holdings of South Korea’s local-currency bonds last month by the most in a year, according to data released today by the financial regulator.

The amount of the securities they owned fell 3.9 trillion won ($3.4 billion) to 83 trillion won, sliding from a record high at the end of November, the Financial Supervisory Service said in an e-mailed statement today.

U.S. investors were the biggest sellers, reducing their ownership of the notes by 2.5 trillion won, the regulator said. Funds based in Luxembourg and Thailand together cut their holdings by 2.4 trillion won. Kazakhstan investors were the biggest net buyers, adding 1 trillion won, while funds in Hong Kong boosted ownership by 198.5 billion won, FSS data show.

For the whole of 2011, overseas investors’ holdings of Korean bonds increased by 7.1 trillion won, the regulator said. Funds in China and Malaysia were the biggest net buyers.

Overseas investors bought 113.4 billion won more Korean stocks than they sold in December, FSS data showed. Funds based in Singapore were the biggest buyers, followed by those in Canada and Sweden, the regulator said. Foreign ownership of the nation’s shares fell by 9.6 trillion won last year.

The won weakened 0.8 percent against the dollar in December, contributing to a 2.2 percent retreat for the year, according to data compiled by Bloomberg. The benchmark five-year bond yield fell five basis points last month to 3.44 percent and the Kospi Index of shares lost 1.2 percent, Korea Exchange Inc. prices show. A basis point is 0.01 percentage point.

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