Foreign investors sold nearly the same amount, offloading a net 62.1 trillion won worth of Korean equities and investment funds, more than seven times the 8.5 trillion won sold in the previous quarter, Bank of Korea data showed Tuesday.
The BOK said the domestic sector posted net lending of 84.3 trillion won ($55.1 billion) in the January-March period, up from 51.9 trillion won in the previous quarter.
Households and nonprofit institutions serving households remained the largest net-lending sector, with net lending rising to 79.2 trillion won from 67 trillion won. Their financial asset transactions climbed to 96.3 trillion won from 84.3 trillion won, driven by the surge in purchases of equity securities and investment fund shares.
The central bank said much of the increase in household deposits came from investor cash parked at securities firms rather than ordinary bank deposits. Deposits at financial institutions rose to 29.4 trillion won from 12.8 trillion won even as bank deposits declined, suggesting households shifted money into brokerage accounts, stocks and funds.
Households continued to sell bonds, with net disposals of 7.4 trillion won in the first quarter after selling a net 10.4 trillion won in the previous quarter. Equity securities and investment fund shares accounted for 28.8 percent of household financial assets at the end of March.
The overseas sector moved in the opposite direction. Its net borrowing widened to 84.3 trillion won from 51.9 trillion won as nonresidents stepped up sales of Korean equities.
Financial asset transactions by the overseas sector swung to a net disposal of 20.9 trillion won from a net acquisition of 46.4 trillion won. Nonresidents sold a net 62.1 trillion won of Korean stocks and investment funds, compared with net sales of 8.5 trillion won in the fourth quarter.
Appetite for foreign equities remained strong. Koreans' overseas stock investment totaled 40.3 trillion won, down from 61.5 trillion won in the previous quarter but still large, while overseas direct investment increased to 28.9 trillion won from 18.1 trillion won.
The pattern helps explain the unusual combination of a soaring KOSPI and a weak won. Household money moved toward stocks, funds and brokerage accounts, while foreign selling and residents' overseas investment sustained demand for dollars.
Nonfinancial corporations also shifted into a larger net lending position. Their net lending rose to 20.8 trillion won from just 100 billion won in the fourth quarter as financial asset transactions increased to 137 trillion won from 58.4 trillion won.
Corporate borrowing from financial institutions rose to 32.2 trillion won from 10.6 trillion won. Direct financing, however, swung to a net repayment of 7.9 trillion won from net borrowing of 21.4 trillion won, while corporate bond financing shifted to a net repayment of 11.8 trillion won from net issuance of 15.9 trillion won.
The general government's net borrowing widened to 23.3 trillion won from 19 trillion won. Government bond issuance surged to 49.7 trillion won from 3 trillion won, helping explain recent upward pressure on long-term Korean bond yields amid concerns over heavy debt supply.
At the end of the first quarter, the domestic nonfinancial sector held financial assets of 14.77 quadrillion won against financial liabilities of 8.335 quadrillion won, leaving net financial assets of 6.435 quadrillion won.
The ratio of financial assets to financial liabilities for households and nonprofit institutions rose to 2.60 from 2.54 at the end of the previous quarter.
Separately, the BOK said the household debt-to-GDP ratio fell to 85.3 percent in the first quarter as nominal GDP grew 4 percent while household debt increased 0.6 percent. The central bank cautioned, however, that the decline should be assessed together with the continued rise in household debt and the renewed pickup in borrowing seen in the second quarter.
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