South Korean investors are pulling their money out of stock funds as the country's stock market continues to build up gains on the back of strong buying by foreign investors and pension funds, data showed Monday.

According to the data compiled by the Korea Financial Investment Association, local stock funds suffered a net outflow of 536 billion won ($482 million) last week, with the daily fund redemption hitting an eight-month high of 283 billion won Friday.

On Thursday, investors took some 221 billion won out of local stock funds, the data showed.

The local stock market, fueled by strong foreign buying, has continued its upward march with the key KOSPI index gaining 2.6 percent last week.

Foreign investors have scooped up local stocks worth over 2 trillion won over the past couple of weeks as the European Central Bank started its bond-purchasing program earlier this month.

Also, the Bank of Korea, South Korea's central bank, cut its policy rate by a quarter percentage point to a record low of 1.75 percent in a bid to ward off deflation and support Asia's fourth-largest economy feared to be losing growth momentum.

The nation's stock market has been boxed in a tight range for years with the KOSPI swinging between 1,700 and 2,100 points, due to a slump in economic growth and downgraded corporate earnings.

Stock fund redemptions usually have increased when the market is in a bullish mode, which has contributed to the local stock market falling back whenever it has attempted to break out of the tight trading range.

But given stock funds' waned influence over the stock market, it is time for investors to reconsider their long-held investment stance, analysts said.

"Local stock investors have been playing a 'buying dips and selling rallies' strategy for the past few years, which pushed the local stock market deeper into a tight box," said Kim Hu-jung, an analyst at Yuanta Korea Securities.

"But low borrowing costs and improving sentiment may help trigger a shift in their investment strategies." (Yonhap)