Foreign investors net-buy 37.3 trillion won in Korean government bonds after WGBI inclusion

Foreign investment in South Korean government bonds has remained stable since the country’s inclusion in the World Government Bond Index. The government pledged to continue monitoring capital inflows and pursuing institutional reforms to improve the investment environment.

The Ministry of Economy and Finance said Tuesday it held the eighth meeting of the WGBI Standing Review and Investment Promotion Task Force, chaired by Treasury Bureau Director Hwang Sun-gwan, to discuss trends in foreign capital inflows and ways to improve investment conditions since WGBI inclusion took effect.

Foreign net purchases of government bonds since the start of WGBI inclusion stood at 37.3 trillion won ($24.2 billion) on a trade-date basis and 30.7 trillion won on a settlement basis, as of Friday. That represents increases of 41.2 percent and 26.2 percent, respectively, from the same period last year.

Despite heightened volatility in global bond markets driven by growing external uncertainty and shifts in major central banks’ monetary policy, foreign net purchases of government bonds continued consistently from April through June — well above the 28 trillion won recorded on a trade-date basis during the same period last year.

In June in particular, foreign capital continued to flow in, led by Japanese funds, even as 7.9 trillion won in government bonds reached maturity. The government said a stable flow of funds was being maintained, with a diverse range of investors — including central banks, investment banks and international organizations — sustaining net investment.

Japanese investors’ net purchases of government bonds totaled 3.1 trillion won in April, 2.9 trillion won in May and 3.2 trillion won in June. Their total holdings of Korean government bonds rose from 9 trillion won at the end of March to 10.1 trillion won as of Friday.

The meeting also addressed grievances and suggestions raised by foreign investors since the launch of Euroclear services, and discussed related institutional improvements. Euroclear is a global central securities depository that allows cross-border trading of bonds and securities without requiring investors to open separate accounts in each country.

“Foreign capital has continued to flow in during June, following April and May since the WGBI inclusion,” Hwang said. “Given the persistent domestic and external uncertainties surrounding Korea’s financial markets, we will closely monitor foreign capital inflow trends and do our utmost to expand foreign investment in our government bond market even under difficult market conditions.”

fact0514@heraldcorp.com