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The mystery of the $1.8 billion South Korean bond selloff

LiveMint logoLiveMint 27-09-2017 Jiyeun Lee

Seoul: South Korean sovereign bonds saw the biggest exodus of foreign cash since at least 2014 on Tuesday, sparking speculation in Seoul—and beyond—over who is getting out.

While the finance ministry discloses foreigners’ daily transaction volumes, it doesn’t break it down by nationality or fund location. The 2 trillion won ($1.8 billion) selloff marks the second time in three months that South Korea has seen a hefty debt sale by offshore investors and may signal that escalating tensions over North Korea are starting to rattle some foreigners.

Earlier this year, Franklin Templeton Investment’s $40 billion Global Bond Fund cut its Korean holdings by almost half, according to a 31 July filing. That has Lee Mi-seon, an analyst at Hana Financial Investment, suspecting the emerging-market stalwarts may be behind the withdrawal, given their previous investment patterns. Franklin Templeton declined to comment.

Kim Sang-hoon, a fixed-income analyst for KB Investment & Securities Co. linked the selling to Norway’s sovereign wealth fund, which wants to streamline its portfolio. But that proposal has yet to be approved by the country’s government. Bloomberg

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