European funds account for 72% of capital outflow

European funds accounted for 72.4 percent of all money that left South Korea this month amid mounting market jitters over a Greek exit from the eurozone, the financial regulator said Wednesday.

According to the Financial Supervisory Service, British and other European funds sold off various holdings worth 2.38 trillion won ($2.03 billion) in the first 21 days of this month.

Overall, foreign investors withdrew a net 3.29 trillion won in funds during the same period, with U.S. investors withdrawing 909.7 billion won.

“The exodus is mainly due to concerns of Greece exiting the eurozone, which has fueled worries in European countries,” the watchdog said.

The move by the European Banking Authority to get banks to raise their core tier ratio to 9 percent contributed to the outflow of capital, it added. The CT1 ratio must be met by the end of late June, although many banks are struggling to meet this target.

The FSS said that because the eurozone issue will not be fully resolved until Greeks goes to the poll in mid June, there will likely be a steady net outflow of funds for the time being.

“Authorities are keeping close tabs on the movement of capital, with foreign outflow expected to continue at least until the end of next month,” a FSS official said. He said Seoul, however, has a contingency plan to deal with worst-case developments that could hurt the local financial market. 

(Yonhap News)