Foreign Investors Pull Nearly 5.7 Trillion Won from Korean Markets Following Martial Law Decree | Be Korea-savvy

Foreign Investors Pull Nearly 5.7 Trillion Won from Korean Markets Following Martial Law Decree


Foreign investors withdrew a significant amount of capital from South Korean financial markets in December during a period marked by the brief imposition of martial law. (Image courtesy of Yonhap)

Foreign investors withdrew a significant amount of capital from South Korean financial markets in December during a period marked by the brief imposition of martial law. (Image courtesy of Yonhap)

SEOUL, Jan. 16 (Korea Bizwire) — Foreign investors withdrew a significant amount of capital from South Korean financial markets in December during a period marked by the brief imposition of martial law, according to data released on January 15 by the Bank of Korea.

The central bank’s “International Financial and Foreign Exchange Market Trends” report shows that foreign investors pulled out a net $3.86 billion from domestic securities markets last month. This marks the largest outflow since March 2020 ($7.37 billion) during the COVID-19 pandemic. Based on the won-dollar exchange rate at the end of December (1,472.5 won), the withdrawal amounts to approximately 5.68 trillion won. 

In the stock market, foreign investors withdrew a net $2.58 billion in December, marking the fifth consecutive month of net outflows following August (-$1.85 billion), September (-$5.57 billion), October (-$4.17 billion), and November (-$2.95 billion).

The Bank of Korea attributed the continued stock market outflows to “persistent concerns about the growth potential of domestic semiconductor companies, domestic political uncertainty, and worries about delayed global interest rate cuts.” 

The bond market also experienced a reversal, with foreign investors withdrawing a net $1.28 billion in December, switching from November’s net inflow of $810 million.

“Bond funds turned to net outflows due to Treasury bond maturities and continued low arbitrage opportunities, amid slower foreign investment ahead of year-end,” the central bank explained.

The credit default swap (CDS) premium on Korean government bonds (based on 5-year Foreign Exchange Stabilization Fund bonds) averaged 36 basis points in December, up 2 basis points from November’s 34. The Bank of Korea noted this remains significantly lower than levels seen during the Federal Reserve’s monetary tightening in October-November 2022 (59bp) and the Silicon Valley Bank collapse in March 2023 (43bp). 

The won-dollar exchange rate showed increased volatility in December, with average daily fluctuations of 5.3 won and a daily variation rate of 0.37%, up from November’s 4.7 won and 0.34%, respectively.

M. H. Lee (mhlee@koreabizwire.com) 

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>