"Foreign Capital Tide Halts": Net Inflows to Domestic Stock Market After 8 Months

Bank of Korea Reports Post-August Trends in International Finance and Forex Markets
Foreign Stock Investments Turn to Net Inflows; Bonds See Continued Outflows
4.5 Billion Dollar Net Outflow from Securities Market for Seven Consecutive Months

Foreign capital turned to net inflows in the domestic stock market for the first time in eight months. However, continued outflows from the bond market resulted in an overall net outflow from the securities market.

On the 16th, the real-time KRW-USD exchange rate and KOSPI were displayed on the electronic board in the dealing room of the Hana Bank headquarters in Jung-gu, Seoul. Photo by Yonhap News Agency

According to the "Trends in International Finance and Foreign Exchange Markets after August 2026" announced by the Bank of Korea on September 17, foreign capital in the domestic stock and bond markets posted a net outflow of 4.5 billion dollars last month, based on settlement date. This marks the seventh consecutive month of net outflows since February. However, the outflow volume was significantly reduced compared to July's 21.65 billion dollars.

Last month, foreign capital in the stock market reversed to a net inflow of 40 million dollars. Foreign investors had withdrawn a total of 130.91 billion dollars from the domestic stock market from January to July this year. This was attributed to profit-taking and rebalancing following a sharp rise in the KOSPI due to the impact of the war in the Middle East. A Bank of Korea official explained, "Despite weakened investor sentiment in August, caused by geopolitical tensions in the Middle East and a global rise in long-term interest rates, there was a slight shift to net inflows, influenced by strong earnings from U.S. technology companies." However, on a trading day basis, net outflows actually increased from 5.46 billion dollars in July to 8.66 billion dollars in August.

Bond market capital saw a net outflow of 4.53 billion dollars. The scale of outflows increased from the previous month's 960 million dollars due to intensified short-term arbitrage incentives and rising market interest rates.

The won-dollar exchange rate fell sharply to 1,368.6 won at the end of August, compared to 1,424.0 won at the end of July. Despite geopolitical uncertainties in the Middle East, improved foreign exchange market supply-and-demand resulting from a growing current account surplus and strong economic growth prospects drove the decline. As of September 15, the rate stood at 1,359.4 won, maintaining movement in the mid-1,300 range.

The volatility of the won-dollar exchange rate also decreased in August compared to the previous month. The average daily fluctuation in August was 4.4 won, with a fluctuation rate of 0.31%.

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