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Foreigners cutting exposure to corporate bonds amid virus concerns

All News 10:24 March 26, 2020

SEOUL, March 26 (Yonhap) -- Foreign investors are gradually increasing their sell-offs of corporate bonds here in addition to their extended selling binge of local stocks, seeking safer havens to park their money amid the coronavirus pandemic, data showed Thursday.

Offshore investors' holdings of South Korean corporate bonds had contracted to 67.3 billion won (US$54.8 million) as of Tuesday, according to the data from market tracker Yonhap Infomax. This is a 43.5 percent drop from their yearly peak on Feb. 21.

In a stark contrast, foreign purchases of relatively safer state bonds rose 3.1 percent to 104.8 trillion won over the same period.

Foreigners cutting exposure to corporate bonds amid virus concerns - 1

The COVID-19-triggered economic and financial turmoil, following a Sino-American trade tussle, has emerged as a big drag on the Asia's fourth-largest economy.

Foreigners' holdings of local corporate bonds, which did not fall below the 160 billion-won mark from September 2018-August 2019, have declined sharply almost every month since.

Overseas investors recent exit from the local corporate bond market mirrors concerns over the respiratory illness' economic impact on local business, experts said. Even in the global financial crisis of 2008, foreign ownership of South Korean corporate bonds had stayed above the 500 billion-won level, Infomax data showed.

Foreigners have also been net sellers of local stocks since March 5, having offloaded a net 10.2 trillion won through Wednesday.

Amid their weekslong selling mode, the benchmark Korea Composite Stock Price Index (KOSPI) nosedived to a yearly low of 1,439.43 points on March 19, before rising back to the 1,700 mark on Wednesday.


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