SEOUL, Oct 31: South Korea is likely to see foreign investors continue their buying streak of local stocks for some time, the central bank said on Thursday, as the economy posts steady growth this year.
‘Foreign stock inflows will be maintained for the time being on strong fundamentals like a current account surplus,’ the Bank of Korea said in its twice-yearly financial stability report.
‘However, when considering the high uncertainties in the global financial markets, there is a large chance flow volatility will widen.’
The central bank added that some profit-taking outflows could be seen should financial conditions change inside and outside the country, including the U.S. Federal Reserve’s pending tapering of its $85 billion monthly asset purchases.
Offshore investors have set a record net buying streak of South Korean stocks this year and were set to extend it to a 45th session on Thursday. As of Wednesday, their total net purchases during that streak stood at 13.9 trillion won ($13.1 billion) worth of local stocks.
The Bank of Korea declined to give the actual percentage of short-term foreign flows into the stock market, but said it was ‘not high.’
The central bank also warned that foreign investment trends in the bond futures market need to be watched closely, as a sudden surge in outflows stemming from the U.S. Federal Reserve’s eventual unwinding of its monetary stimulus could push up spot market yields and destabilise local markets.
The BOK said foreign investment in local bonds is likely to fall due to such factors as debt redemption and an expected reduction in global liquidity. ($1 = 1060.2750 Korean won) (agencies)
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