Foreign stock funds log cash inflows for 2nd month

Funds that invest in foreign stocks have received a 470 billion won ($416 million) net inflow so far this year as investors chased after higher investment returns in overseas markets amid low interest rates at home, data showed Thursday.

Foreign equity funds had a net 315 billion won cash inflow last month following 155 billion won in January, according to the data compiled by fund tracker Zeroin. January's tally marked the first monthly net positive since June 2009.

Foreign stock funds have suffered massive outflows over the past few years as investors who had jumped in during an earlier stock boom in emerging markets exited to reduce losses after being spooked by the financial crisis in late 2007.

The capital outflows largely affected funds with exposures to Brazil, Russia, India and China, known as the BRIC market.

Last year local investors pulled out a net 3.7 trillion won from foreign stock funds despite their relatively stable yield rates. The comparable figures for 2013, 2012 and 2011 were net outflows of 4.5 trillion won, 4.2 trillion won and 7.2 trillion won, respectively, according to the data.

Analysts said steady rises in Chinese and other major foreign stock markets are bringing back investors.

China's stock market has been rallying this year with the Shanghai Composite Index, the mainland's benchmark, surpassing the psychologically resistant 3,500-point level for the first time in almost seven years.

South Korea's stock market, strained by weak corporate earnings and slower-than-expected growth momentum, has been relatively sluggish, driving investors out of the local equity market.

"Given record-low borrowing costs, local investors are changing their investment strategies in search for higher returns in overseas equity markets," said Oh Eun-soo, an analyst at Hyundai Securities.

The country's central bank, the Bank of Korea, cut its policy rate by a quarter percentage point last week to a record low of 1.75 percent to support Asia's fourth-largest economy. (Yonhap)