Investors from China and Japan have been aggressively tapping the South Korean financial market, industry data showed Sunday, helped by China’s recent policy to globalize its financial sector and Japan’s monetary easing.
In the first 10 months of the year, Japanese investors bought a net 2.8 trillion won (US$2.5 billion) worth of shares on the Seoul bourse, becoming the second-largest investor following U.S. investors who purchased a net 3.6 trillion won worth of shares, according to the data.
Chinese investors bought a net 2 trillion won worth of shares in the January-October period, after their net purchase of local shares reached 2.2 trillion won last year.
The combined net buying by Japanese and Chinese investors took up 78.4 percent of overall net buying by foreign investors in the January-October period.
Chinese investors bought a net 1.3 trillion won worth of bonds, becoming the second-largest investor after Singaporean investors, with U.S. investors selling a net 1.1 trillion won worth of bonds.
Thanks to the aggressive purchase of local debts, China became the largest holder of Korean debts, which was worth 13.8 trillion won, beating the United States.
In addition, yuan-denominated deposits continued to rise in October, adding $1.4 billion over the month to $21.7 billion to account for 32.7 percent of all foreign currency deposits. The yuan-denominated deposits were less than $200 million at the end of 2012.
“Institutional investors have poured their money into the Korean financial market up until now to get more interest from deposits whose interest was about 3 percent annually,” said Jeon Jae-hwan, an official at the Bank of Korea.
“Once trade settlement based on the yuan is expanded, more local companies also will open yuan-denominated deposits in the future,” he said.
Chinese investors also are making inroads into the local merger and acquisition (M&A) market, with China’s Fosun Group joining the race to buy Hyundai Securities Co. and Chinese firm Anbang Insurance Group showing interest in buying Woori Bank.
Japanese investors are scurrying to invest their money in the local consumer finance market. J Trust Group, a Japanese financial group, was picked as the main bidder for a 74.2 percent stake in Aju Corp., a ready-mixed concrete provider, which is the biggest shareholder of Aju Capital Co., a local lender with assets of more than 6 trillion won.
Market watchers said a shift in the financial climate at home and abroad seems to have led Chinese and Japanese investors to park their money in the Korean financial market.
“Ample liquidity from Abenomics and the aggressive overseas investment by Japan’s pension fund could be a catalyst for further investment in the South Korean financial market by Japanese investors,” said Ahn Nam-gie, a researcher at the Korea Center for International Finance.
Abenomics refers to the economic policies pushed by Japanese Prime Minister Shinzo Abe that are focused on fiscal stimulus and monetary easing.
“As the Chinese government drove its sovereign wealth funds and private financial companies to invest in foreign markets, financial investments from China have been on the increase,” said Ji Man-soo, a researcher at the Korea Institute of Finance. Sovereign wealth funds refer to institutions owned by a country operated with government assets.
“We have to establish countermeasures against the Chinese investment, which is expected to gain more steam in the future,” Ji said. (Yonhap)
