Korean investors gobble up foreign bonds amid lack of investments at home

Korean investors hungry for returns amid sluggish equity and real estate market and protracted low-interest environment at home are eagerly chasing offshore debt.

According to Korea Securities Depository on Monday, Korean investors purchased total $34.3 billion worth of foreign debts as of June 21 this year, already 79 percent of full 2018 bond purchases. During the same period, Korean investors sold $27.96 billion worth of foreign debts to result in a net buying of $6.3 billion.

Buying centered on U.S. debts whose security appeal was added by stronger U.S. dollar. Acquisition of U.S. government and corporate bonds by Korean investors totaled $5.9 billion during the period, topping last year’s full-year figure of $5.5 billion.

Local investors’ investment in bond-type funds also has surged. According to local market tracker FnGuide, funds that invest in foreign debts drew in a total of 1.6 trillion won ($1.4 billion) so far this year, up 72 percent from the beginning of this year. During the same period, the investment in domestic bond funds grew by 34 percent.

The current U.S. Federal Reserve fund overnight lending rate is set in a range between 2.25 percent and 2.50 percent, whereas Korea’s benchmark interest rate stands at 1.75 percent. This, coupled with investor demand for U.S.-dollar denominated assets, is driving up the Korean investors’ buying spree on U.S debts that pay relatively higher interest rates, according to market experts.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]