Foreign investors' net selling in the domestic stock market hit an all-time high last month. The record outflow is attributed to continued profit-taking combined with risk aversion triggered by the Iran conflict.
According to the 'International Finance and Foreign Exchange Market Trends Since March' released by the Bank of Korea on the 12th, foreign investment in domestic securities (stocks and bonds) recorded a net outflow of $36.55 billion (approximately 54.18 trillion won) last month. This marks the second consecutive month of net outflows and the largest-ever net outflow. The figure is roughly four times greater than the previous record of $8.97 billion set during the financial crisis in July 2008.
The massive exodus of stock funds was the primary driver. Stock investments saw a net outflow of $29.78 billion (approximately 44.14 trillion won), also setting an all-time record. This more than doubles the previous record of $13.5 billion in February this year. The BOK explained, "Profit-taking continued, and risk aversion sentiment intensified due to geopolitical risks in the Middle East, expanding the scale of net outflows."
Bond funds, which had recorded four consecutive months of net inflows since November last year, posted a net outflow of $6.77 billion last month. The reversal to net outflow was due to government bond redemptions and weak reinvestment amid low arbitrage incentives.
Meanwhile, the Korean won depreciated significantly due to rising international oil prices from the prolonged Middle East situation and massive net selling of domestic stocks by foreign investors. From the 1st of last month to the 7th of this month, the won fell 4.3%, the second-largest decline among major currencies after the South African rand (-5.9%).
The average daily fluctuation of the won-dollar exchange rate last month was 11.4 won, widening from the previous month's 8.4 won. The volatility rate was 0.76%, also increasing from February's 0.58%.