Foreign investors are shoveling in Korean securities, betting on strengthening in the Korean won on improving trade data.

According to the Korea Exchange Wednesday, foreign investors bought 1.62 trillion won worth of stocks on a net basis so far this year, helping to push up the benchmark index above the 2,100 mark. In the bond market, they bought government bonds worth 3.48 trillion won ($3.05 billion) and monetary stabilization bonds worth 4.40 trillion won this year.

It is rare for foreigners to show voracious appetite for both safe public debt and riskier equities denominated in Korean currency. The turn suggests foreign confidence in the Korean economy despite poor domestic sentiment and outlook amid political unrest ahead of presidential impeachment trial and possible follow-up election.

The won has turned northbound, hovering around the 1,140 won from the 1,200 won level against the U.S. dollar earlier in this month. The local currency has strengthened as exports have kept up rising trend for the last four months.

At 12:45 p.m. in Seoul trading, the dollar retreated 6.20 won to 1,138.3 backed by foreign bet on authorities condoning a stronger won ahead of the U.S. Treasury Department review on foreign currency polices of its trading countries. Korea currently on the watch list is reportedly doing all it can to avoid being bundled up with China and Japan that U.S. President Donald Trump accused of currency manipulation.

Stronger exports and corporate income have also turned foreigners bullish in Korean stocks.

Customs data placed 20-day exports for this month 26.2 percent higher from a year-ago period. Full-month figures in November last year edged up 2.5 percent on-year, followed by rises of 6.4 percent in December and 11.2 percent in January.

Combined operating profits of Korean listed companies for last year are estimated up 150 trillion won, another factor fueling strength in the won.

Foreign investors are gobbling up of won-denominated bonds despite gains in the government yields, convinced that higher returns from stronger won would offset the price fall. It is why their recent purchases were centered on shorter-term bonds. Among their net bond purchases of 3.48 trillion won in 2017, 62.1 percent, or 2.16 trillion won, were spent on bonds that mature within the next five years. In contrast, net buying of longer 20-year and 30-year bonds came to a mere 190.9 billion won and 185 billion won, respectively.

By Park Yoon-gu

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