As the South Korean currency weakened at a faster pace and emerging economies are rattled by global financial uncertainties, foreigner investors are pulling out their money en masse from the local equity market, data showed Friday.
  

Snapping their five-month buying streak in June, foreigners dumped a net 2.65 trillion won ($2.24 billion) in the June-July period, according to data compiled by the Financial Supervisory Service.  

In July alone, offshore investors unloaded a net 2.26 trillion won worth of local stocks, marking the largest sell-off since June 2013, when the comparable figure was 5.1 trillion won.
  

The value of their stock holdings both in the benchmark KOSPI and the secondary KOSDAQ totaled 430.6 trillion as of the end of July, accounting for 28.9 percent of the total market, falling below the 30 percent level for the first time since August 2011.
  

In the bond market, the foreign exodus is far steeper as foreigners dumped a net 2.26 trillion won worth of local shares last month, compared with a net selling of 389 billion won the previous month.
  

Their bond ownership reached 103 trillion won as of end-July, with its percentage dropping to 6.6 percent from 6.9 percent a month earlier.
  

Analysts said a weakening local currency is fueling foreign capital outflow from Asia's fourth-largest economy, with the recent Chinese devaluation and a possible U.S. rate hike exacerbating the situation.
  

In the last three months, the won declined 10.9 percent against the U.S. dollar. On Friday, the local currency hit a fresh four-year low of 1,195 won to the greenback, down 9.9 won, or 0.84 percent, from the previous session's close.
  

"A sharp depreciation in the local currency pushes foreign investors to sell local stocks as they are concerned about massive foreign exchange loss," said Ahn Nam-ki, senior researcher at the Korea Center for International Finance.
 
 
"They take a defensive strategy to reduce their ownership of local stocks."

The percentage of foreign shareholdings had been on a steady rise since 2013, with the won-dollar rate hovering between the 1,030 won and 1,060 won.
  

He said South Korea is not the only country that is experiencing such foreign capital flight as most emerging countries are struggling with weakening local currencies in the face of growing appetites for safe assets and an imminent rate hike in the U.S.
  

Malaysia's ringgit lost 7.31 percent against the U.S. greenback in July, while the Thai Baht fell 3.86 percent and the Singaporean dollar dropped 3.43 percent, according to data by Mirae Asset Securities Co.
  

However, experts remain cautious in translating the recent tendency of foreign efflux as the start of a "sell Korea" movement, and have taken a wait-and-see stance until the U.S. central bank actually raises the key rate sometime in the future.
  

"The China devaluation had a transient impact on the foreign exchange markets of emerging countries, as their currencies have steadily weakened for months due mainly to the imminent U.S. rate hike," said Lee Jae-hoon, an analyst at Mirae Asset. "Investors will turn their eyes again to the United States."
  

"Offshore investors consider various economic indices, financial soundness as well as FX rates, when they bet money on emerging markets," said Ahn from the KCIF. "They are more sensitive to corporate earnings and economic fundamentals in the long-term." (Yonhap)