Foreign investors increased their exposure to South Korean government bonds in the first month following the country’s entry into the FTSE World Government Bond Index, or WGBI, with both net purchases and holdings moving higher.
Government and industry data show that foreign investors bought a net 10 trillion won ($6.8 billion) worth of Korean Treasury bonds on a trade basis between March 30 and Monday. On a settlement basis, net purchases totaled 7.9 trillion won.
The pace of inflows built steadily over the month. Net purchases reached 4.4 trillion won in early April, rose to 7.7 trillion won by mid-month, and expanded further to 8.5 trillion won by the third week.
Foreign holdings also rose, with outstanding balances increasing 3.3 percent to 306.74 trillion won as of Thursday from 297.16 trillion won a month earlier, according to Yonhap Infomax.
Market participants said the trend reflects stable, longer-term positioning by foreign investors, although the overall scale of buying has been somewhat below initial expectations tied to index inclusion.
Korea’s WGBI entry is expected to bring in between 74 trillion won and 89 trillion won in passive inflows this year. Based on the eight-month inclusion schedule, this implies average monthly inflows of around 8 trillion won to 9 trillion won.
Analysts noted that index-tracking funds often adjust allocations later in the year, leaving room for stronger inflows in the coming months.
minmin@heraldcorp.com