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Korea Herald
25-05-2025
- Business
- Korea Herald
Foreign inflows into Korean bonds hit record pace as safe-haven appeal grows
Rate cut bets, fiscal strength, WGBI inclusion drive surge in foreign demand for sovereign debt Foreign investors are increasingly expanding their investment in South Korean sovereign bonds, underscoring their reputation as a safe-haven asset. Expectations of an imminent policy rate cut cycle have further contributed to the surge in offshore demand. While foreign investors remain cautious about the local stock market amid heightened risks from the US tariff policies, they are actively turning to Korean government-issued fixed-income securities, which are widely regarded as low-risk assets thanks to the country's solid fiscal standing. According to the Korea Financial Investment Association, offshore investors net purchased Korean government bonds worth 16.1 trillion won ($11.6 billion) in April, following net purchases of 13 trillion won in March. In contrast, they offloaded a net 14 trillion won worth of Korean stocks in April. 'Foreign investors' net buying of Korean government bonds has surged in recent months, as arbitrage opportunities have grown more attractive amid trade tensions and currency uncertainties,' an official from the association said. Among government bonds, Korea Treasury Bonds — used to finance public expenditures — have seen particularly strong demand. According to a report from the Ministry of Economy and Finance, the outstanding balance of KTBs held by foreign investors reached 255.2 trillion won in April, a 9.6 trillion won increase from the previous month. Total foreign inflows into government bonds this year have reached 15.7 trillion won. Foreign ownership of the KTB market stood at 23 percent in April, up 0.8 percentage point from the start of the year. Offshore demand for KTBs has been on an upward trajectory for years, rising from around 2 percent in 2006 to 15.4 percent in 2010 and reaching 20.5 percent in 2022. Amid this buying rush, the average yield on KTBs has declined, falling to 2.56 percent in April from 3.17 percent in 2022 — effectively lowering the interest Korea pays to secure capital. Investor sentiment has also been buoyed by expectations of an upcoming policy rate cut. During periods of monetary easing, demand for existing bonds tends to rise, as their fixed coupon rates become more attractive compared to newly issued bonds with lower yields. The Bank of Korea, which has held its policy rate at 2.75 percent since February, is expected to begin cutting rates later this year in an effort to stimulate the country's export-driven economy, which is under pressure from the US' trade measures. The Korean government has long prioritized attracting foreign investment in sovereign debt. In the aftermath of the 1997 Asian financial crisis, Korea lifted the cap on foreign investment in listed bonds. Since then, it has introduced additional measures to bolster demand, including omnibus accounts and tax exemptions for foreign investors. Another key driver of recent demand is Korea's upcoming inclusion in the World Government Bond Index, a global benchmark for sovereign debt managed by London-based FTSE Russell. Korean sovereign bonds will be added to the index in phases from April 2026 to November 2026. 'Making sovereign bonds more appealing to foreign capital is an important agenda for the Korean government,' a Finance Ministry official said. 'Increased demand for government bonds helps lower their coupon rates, effectively reducing the government's borrowing costs.'
Korea Herald
31-03-2025
- Business
- Korea Herald
Number of ISA holders tops 6m in 9 yrs: data
The number of individual savings accounts has breached the 6-million mark, data showed Monday. A total of 6.04 million people held ISAs as of the end of last month, with their deposits in the accounts reaching 36.5 trillion won ($24.8 billion), according to the data from the Korea Financial Investment Association. The financial product was introduced in March 2016 as part of the government's efforts to help individuals increase their wealth with a one-stop scheme and give customers tax benefits. ISAs allow customers to pick specific investment products, such as stocks, funds or deposits, themselves or let financial services firms manage their assets. Brokerage-offered ISAs stood at 5.1 million at the end of last month, accounting for 84 percent of the total. Industry watchers said the number of subscribers to brokerage ISAs will further rise on extended tax credits for the products. (Yonhap)
Korea Herald
05-02-2025
- Business
- Korea Herald
Finance association chief vows to push for spot crypto ETFs
South Korea has to embrace cryptocurrency exchange-traded funds tied to cryptocurrencies to not lag behind the sharp growth of the global virtual asset market, the chief of a local finance association said Wednesday. "The global virtual asset market is likely to further growth backed by the Trump 2.0 administration's favorable stance toward the investment vehicle," Korea Financial Investment Association Chairman Seo Yoo-seok said at a press conference held at the industry body's headquarters in western Seoul on Wednesday. The association, also known as Kofia, acts as a self-regulatory organization of the local finance investment industry, representing brokerage houses and asset managers. "While the virtual asset market is projected to continue its expansion, Korea should not be left out,' he said. Spot cryptocurrency ETFs remain out of reach for South Korean investors as the country's top regulator the Financial Services Commission has announced the Capital Market Act does not allow virtual assets to be identified as underlying assets for securities. 'Spot cryptocurrency ETFs are already listed on exchanges in the US, Hong Kong, Canada and more,' Seo said. 'This year, we will discuss the institutionalization of the security token offering, and continue to request the authorities to allow the listing of virtual asset spot ETFs." Seo further highlighted the need to pursue the government's corporate value-up initiative, which calls for listed companies to enhance their corporate value and boost shareholder return. "The value-up initiative is about more than just boosting the stock prices. It is an integrated strategy that calls for the qualitative growth of the economy and the capital market," Seo said. "Kofia will continue to support the value-up program as a national agenda and for it to settle down as a culture." Seo further projected the local stock market to expand with the launch of an alternative trading system next month. Korea's first ATS named Nextrade is set to launch on March 4. 'The new ATS platform will spur market competition,' he said. 'The capital market's infrastructure will experience qualitative growth based on the diversification of traded products and competition,' he said. Seo, former CEO of the country's leading asset manager Mirae Asset Global Investments, took office as the head of Kofia in January 2023. His three-year term is set to last until the end of this year.
