The Bank of Korea’s monetary policy committee warned of increasing risks associated with one particular foreign asset manager holding a “big pot” of Korean fixed-income securities.

They said that the central bank and financial regulators should keep an eye on such an “excessive bond ownership” by the foreign company to preemptively counter volatility following an expected tapering of U.S. quantitative easing, according to the minutes of its July policy meeting.

An exit from U.S. monetary stimulus would prompt the foreign asset management firm to unload its investment in Korean bonds, whose value would decrease while their interest rates increased, analysts said.

The central bank did not name the foreign investment firm, but media and regulatory data pointed to Franklin Templeton Investments as the U.S.-based investment manager holding the biggest share of Korean bonds.

Data from financial regulators showed that Franklin Templeton held about 30 percent of won-denominated bonds invested in by foreign investors.

Franklin Templeton is one of Korea’s biggest bond investors, and Korean investments accounted for about 15 to 20 percent of its Global Bond Fund, an industry source said.

The company did not make an official comment on the matter.

The central bank’s concerns over excessive bond-holding by a single foreign investor came as its committee members expected “the liquidity era” would soon come to an end with the gradual phaseout of U.S. monetary easing, the minutes showed.

This capital movement would not only affect emerging markets but also the Korean financial market, which the central bank is primarily responsible for maintaining stability of through its monetary policy.

Policy committee members also noted the importance of the central bank analyzing the possible effects of monetary easing in Europe and Japan on the Korean economy, along with the U.S. quantitative easing.

By Park Hyong-ki (hkp@heraldcorp.com)