Foreign investors’ holdings of Korean bonds have become more regionally diverse and long-term focused, an analyst said Tuesday.

According to data by the Financial Supervisory Service, foreign investors held a total of 97.4 trillion won ($85.2 billion) worth Korean bonds as of March 31, a 600 billion won increase from a month ago.


By region, Asia held 37.3 percent of Korean bonds, Europe, 35.5 percent, and the U.S., 14.6 percent.

“Since foreign investment in Korean bonds has diversified in terms of region, liquidity changes in a certain region will have a limited impact on the overall Korean bond market,” said Seo Hyang-mi, a fixed income strategist at Hi Investment & Securities.

Foreign investors’ holdings among the total listed fixed income securities inched down by 0.1 percentage point to 6.1 percent in May, the lowest level since April 2010.

However, their holdings of Korean treasury bonds, usually sold with 3-year and 5-year maturity, have continued to rise while those of monetary stabilization bonds with maturity of 14 days to 2 years have continued to fall, Seo said.

These shifting trends imply that foreign investors have increased their investments in long-term Korean bonds, she said.

China, the largest holder of Korean bonds with 18.4 percent holdings, additionally invested 366 billion won in Korean bonds last month, seemingly diversifying its investment from ample foreign reserves which increased by $10.3 billion in March, she noted.

Switzerland was the second largest holder of Korean bonds with 14.8 percent holdings in March, beating out the U.S. with 14.6 percent. It net-invested 1.2 trillion won in Korean bonds in March.

“A continued capital influx from Switzerland prevents China’s dominance in the Korean bond market and raise expectations that Swiss capital can offset an exodus of U.S. capital or slower inflow of Chinese capital,” she said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)