The Institute of International Finance data showed that global investors raised the proportion of Korean equities and bonds in their emerging market portfolio by 0.498 percentage point during the third quarter. This marked the highest among 31 emerging economies.
The group, with close to 500 members from 70 countries, calculated the global funds’ in-and-out during the June-September period, when financial indices in the emerging markets posted huge volatility in the wake of a possible rate hike in the U.S. and China’s economic slowdown.
South Africa was ranked second as investors raised the country percentage in their portfolios by 0.438 percentage point, followed by India with 0.414 percentage point and Mexico with 0.376 percentage point.
Countries ranked between fifth and 15th included Poland, Thailand, Colombia, Hungary, Romania and the Philippines.
In contrast, investors worldwide scaled back their equity funds into countries such as China, Brazil, Chinese Taipei, Indonesia, Turkey and Saudi Arabia.
As a result, Korea’s portion climbed to 9.2 percent of their total stock and bond investments in the 31 destinations, up from 8.6 percent, which is the country’s average over the past seven years.
An IIF economist stressed that Korea has suffered less capital flight compared to other emerging countries noting that the net-capital outflow from Korea stayed at $2.8 billion in the third quarter, while China suffered a net-outflow of $10 billion.
Local analysts say that Standard & Poor’s upgrade of Korea’s sovereign rating in September could have raised its credibility among global funds. Korea’s credit rating was increased one level to “AA-” after 18 years since August 1997 ― right before the 1997-98 Asian currency crisis hit the nation.
But the uncertainty of a possible massive exit by global funds from the Korean bourse lingers on, as the Federal Reserve is still fine-tuning the timing of a base rate hike, despite weaker-than-expected employment figures in the U.S.
The benchmark KOSPI recovered the 2,000 mark last week ― after staying under 1,900 points in early September ― on the back of mounting expectations that the U.S. Federal Reserve could delay its key rate hike to sometime next year.
Stock analysts, however, forecast that a rally would be restricted at least until the market confirms a variety of effects from a U.S. hike.
The KOSPI and indexes of other emerging markets have fluctuated over the past few months whenever some of the 10 members of the Federal Open Market Committee hinted at a hike within the year. The FOMC is the rate-setting panel of the Federal Reserve.
By Kim Yon-se (kys@heraldcorp.com)
