Foreign investors withdrew a record monthly amount from Korea's stock market last month, the largest on record. The exodus is attributed to rebalancing (adjustment of equity ratios) and profit-taking amid a sharp rise in domestic stock prices.
According to the "Trends in International Finance and Foreign Exchange Markets Since May 2026" released by the Bank of Korea (BOK) on Monday, foreign investment in domestic securities (stocks plus bonds) recorded a net outflow of $26.15 billion (about 39.5 trillion won) last month. After a record net outflow of $36.55 billion in March, the figure narrowed to $2.13 billion in April before surging again. It marked the fourth consecutive month of net outflows since February, with a cumulative $70.2 billion flowing out from the start of the year through May.
By securities type, stock funds posted a net outflow of $31.83 billion (about 48.1 trillion won), surpassing the previous record of $29.78 billion set in March this year. The BOK explained that "the net outflow expanded due to rebalancing following the rise in domestic stock prices and selling for profit-taking." Stock funds have shown a net outflow trend for five consecutive months, with cumulative net outflows from the start of the year through May reaching $77.83 billion (about 117.61 trillion won).
Bond funds posted a net inflow of $5.68 billion (about 8.6 trillion won), marking a second consecutive month of net inflow following April's $550 million. The net inflow grew on the back of funds tracking the World Government Bond Index (WGBI) and bargain-hunting amid rising market interest rates.
The won-dollar exchange rate depreciated more sharply than the currencies of other major economies. From the first day of last month through the 11th of this month, the won fell 3% against the U.S. dollar. Among major currencies, the won posted the largest decline except for the Indonesian rupiah (-3.7%).
The BOK analyzed that "the exchange rate rose (the won's value fell) due to increased uncertainty in the Middle East and foreign investors' net selling of domestic stocks, but the increase narrowed thanks to the government's market stabilization message and the National Pension Service's forward exchange selling."
Won-dollar exchange rate volatility decreased last month compared with the previous month. The daily average fluctuation in the May won-dollar exchange rate (versus the previous day) was 6.6 won, narrowing from 8.9 won the previous month. The fluctuation rate also fell to 0.45% from 0.59% over the same period.
