European investors led by Norway and Switzerland have increased their exposure to South Korean bonds as Korean debts are providing higher returns amid the economic recovery, data showed Monday.

Investors from Norway held Korean won-denominated bonds worth

5.4 trillion won ($5.25 billion) as of end-March, up 4.7 percent from the end of last year, according to the financial watchdog.

Investors from Switzerland also saw their investment in Korean bonds reach 8.2 trillion won, up 16.1 percent from the end of last year, the data showed.

In the cited period, the U.S., led by Franklin Templeton Investments, invested in Seoul bonds worth 18.8 trillion won as of the end of March, down 6.1 percent from the end of last year.

"Templeton's investment has weakened since early this year while investors from Norway and the Switzerland have increased their exposure to Seoul debt," said Lee Jae-hyung, an analyst at Tong Yang Securities Co.

The Norwegian sovereign fund Government Pension Fund Global has increased its investment in bonds sold by Asian countries, including South Korea, since the second half of 2012 as such debts have higher yields.

Analysts said that an increase in investment from Switzerland may be connected to its central bank's move to diversify its foreign reserve portfolio.

"There are some concerns that Templeton's reduction in its investment in Korean bonds may spark capital flight," Lee said.

"But I think there is a low chance that such concerns will materialize." (Yonhap)