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Foreign holdings of S. Korean bonds drop to 6-month low

Finance 16:33 December 08, 2019

SEOUL, Dec. 8 (Yonhap) -- The total value of South Korean bonds held by foreigners dropped to the lowest level in six months, data showed Sunday, after non-residents largely cashed in their debt investments.

Foreign investors owned 122.3 trillion won (US$102 billion) worth of South Korean-listed bonds as of last Wednesday, down 2.4 trillion won from end-November, according to the Financial Supervisory Service (FSS).

This is the lowest mark of the year since June 20, when foreigners held 122.05 trillion won worth of South Korean debts.

The combined value of foreign-owned local bonds peaked in September before suffering a decline in the last two months.

Foreigner investors net bought 3.1 trillion won worth of bonds in October and 1.3 trillion won worth of debt securities in November, but they apparently cashed in a larger amount from matured bonds, according to analysts.

Market watchers, however, said the recent data doesn't necessarily indicate that foreigners are pulling away from the South Korean bond market.

Concerns of foreign capital outflow mounted in the local financial market recently after foreigners sold Seoul stocks for 21 straight sessions before snapping the streak on Friday.

Unlike stocks, investors can collect their returns even if they don't sell their bonds on the market as bonds have a maturity date.

Since investors usually reinvest their proceeds from matured bonds to buy other bonds and wait for the right time to do so, analysts said it's not right to conclude from the short-term figures that the local bond market is facing foreign capital outflow.

"The duration of bonds owned by foreigners actually got longer," Park Min-soo, an analyst at NH Investment & Securities, said. "This means foreigners hold more long-term bonds, which can usually be spotted when investor sentiment improves. Since South Korean bonds are considered safe assets with the country's high credit ratings, it's not likely that foreigners will continue cashing in their debt investments."

kdon@yna.co.kr
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