SEOUL, November 12 (AJP) — Global stocks and currencies have diverged while foreign investors continued to unloand Korean equities in the third quarter as doubts over artificial intelligence investment fueled risk aversion, according tko the Korean central bank Thursday.
The Bank of Korea (BOK) in assessment on global finance said global risk aversion persisted amid concerns about the sustainability of AI investment even as uncertainty surrounding the Middle East eased.
Major stock markets showed divergent performances, reflecting differences in their exposure to the AI investment cycle.
The U.S. S&P 500 fell 1.7 percent from the end of September through November 10, while Japan's Nikkei 225 lost 9.4 percent and South Korea's KOSPI tumbled 23.4 percent. Britain's FTSE 100 gained 1.4 percent over the same period.
The BOK attributed weakness in U.S. stocks partly to concerns over tighter regulations on data center construction following the midterm elections, while Japanese technology shares came under pressure from fears of slowing AI investment.
Government bond yields generally declined as investors sought safer assets. The U.S. 10-year Treasury yield fell to 4.99 percent on November 10 from 5.28 percent at the end of September, while German and British yields also eased.
The U.S. dollar strengthened, supported by better-than-expected employment data and expectations of tighter AI-related regulations. The dollar index rose 0.8 percent over the period, while the Japanese yen and euro weakened.
In South Korea, foreign securities investment recorded a ninth consecutive month of net outflows, although the pace slowed as bond investment returned to positive territory.
Net foreign portfolio outflows narrowed to $13.70 billion in October from $19.97 billion in September, according to the BOK.
Equity outflows widened to $19.31 billion from $14.16 billion a month earlier as concerns over global AI investment profitability weighed on investor sentiment.
Bond investment, however, swung to a $5.61 billion net inflow from a $5.81 billion outflow in September, supported by funds tracking the World Government Bond Index (WGBI) and improving short-term arbitrage incentives.
The three-month arbitrage incentive turned positive at 2 basis points on average in October, compared with minus 31 basis points in September.
Cumulative foreign securities outflows reached $160.75 billion in the first 10 months of 2026, driven overwhelmingly by equity withdrawals.
The won nevertheless strengthened against the dollar, supported by increased dollar selling by exporters.
The currency stood at 1,337.5 per dollar on November 10, compared with 1,352.8 at the end of September. It had strengthened to 1,334.3 at the end of October before giving back some gains.
Currency volatility eased in October, with the won's average daily movement narrowing to 4.6 won from 7.0 won in September.
Despite the continued portfolio outflows, the BOK assessed overseas borrowing conditions for Korean banks as broadly favorable.
Short-term external borrowing spreads narrowed to 18 basis points in October from 27 basis points in September, although medium- to long-term spreads widened to 58 basis points from 40 basis points.
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