Foreign Investors Withdraw $21.65 Billion from Korean Securities Market in July

Bank of Korea Reports Trends in International Financial and Foreign Exchange Markets After July
Net Outflows of $21.65 Billion from Stock and Bond Markets
Rebalancing-Driven Selling Eases Amid Stock Corrections, Narrowing Scale of Outflows

Foreign capital has flowed out of the domestic securities market for six consecutive months. While ongoing geopolitical tensions in the Middle East and heightened caution toward global artificial intelligence (AI) investments fueled net outflows, the scale of the outflow eased as selling pressure from rebalancing subsided following a domestic stock price correction.

On the 12th, the electronic board in the dealing room of Hana Bank in Jung-gu, Seoul, displays the current status of the domestic stock market.

According to the "Trends in International Financial and Foreign Exchange Markets since July 2026" released by the Bank of Korea on August 13, foreign capital showed a net outflow of 21.65 billion dollars from the domestic stock and bond markets last month. This marks the sixth consecutive month of net outflows since February. However, the net outflow has decreased compared to the 30.72 billion dollars recorded in June.

Last month, foreign equity capital recorded a net outflow of 20.7 billion dollars. This marks a reduction in net outflow compared to the 32.37 billion dollars in June. A Bank of Korea official explained, “Equity funds experienced net outflows due to escalating geopolitical tensions in the Middle East and increased global caution toward AI investments. However, as the domestic stock market underwent an adjustment, the scale of the outflows lessened due to the alleviation of rebalancing-related selling pressure.”

Bond funds saw outflows of 960 million dollars, turning to a net outflow for the first time in four months. This was impacted by an increase in the reversal of short-term arbitrage incentives, among other factors.

The KRW-USD exchange rate stood at 1,424.0 won at the end of July, marking a significant decrease from 1,549.4 won at the end of the previous month. Factors contributing to this trend included reduced uncertainty in the Middle East, a weakening dollar due to diminished expectations of rate hikes by the U.S. Federal Reserve, and improvements in supply and demand in the domestic foreign exchange market. As of August 11, the exchange rate remained around the 1,410 won level, trading at 1,416.0 won and continuing to hover near this mark.

Volatility of the KRW-USD exchange rate in July expanded compared to the previous month. The daily average fluctuation was 8.0 won, and the fluctuation rate reached 0.53%.

This content was produced with the assistance of AI translation services.