Foreign investors are making a U-turn to the Korean bond market. After net-selling more than 7 trillion won in the Korean bond market last year due to expectations for higher inflation in the United States following the U.S. presidential election, foreign investors are increasing their exposure to the Korean bond market this year.
The recent increase in foreign investors' purchase in both Korean stocks and bonds is a reflection of the stability and attractiveness of the Korean market.
According to the Financial Supervisory Service on March 30, the amount of Korean bonds held by foreign investors amounted to 97.57 trillion won as of March 29, 2017, the highest since 96.20 trillion won in June 2016. This figure is up by about 8 trillion won compared to 89.33 trillion won in late December 2016.
Analysts said that the main driver behind the increase in foreign investors' investment in Korean bonds is the favorable turn in its foreign exchange rate. After rising to 1,212 won in late December, the won-dollar exchange rate took a downturn this year.