(Bloomberg) -- Foreign inflows into South Korean bonds surged on Tuesday, with net buying topping $1 billion, the most since November, according to the Financial Supervisory Service.
Offshore investors have already net purchased the nation’s debt for 14 straight days, marking the longest streak since May. The inflows are likely due to expectations for the won to strengthen further, along with potential that the nation’s bonds will be added to FTSE Russell’s World Government Bond Index, while in the backdrop, rate cut bets increase the allure of emerging Asian assets in general, according to DB Financial Investment.
The wave of buying indicates that a market which came in first place last year in terms of net foreign inflows remains attractive. Global funds have flocked into emerging Asian equities and bonds this year, in a sign of improving sentiment toward the region as the Federal Reserve moves closer to cutting interest rates.
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Prospects the won will strengthen, and the likelihood the nation’s bonds will be added to FTSE’s global bond benchmarks, are likely the drivers, said Moon Hongcheol, a fixed-income and FX strategist at DB. “The won has been relatively more weak, making it technically more likely to strengthen more.”
Moon expects the won to strengthen as much as to 1,250 per dollar this year, and its bonds to be added to FTSE’s indexes next year. The won was little changed versus the dollar on Wednesday at 1,341.70.
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