Japanese funds flooding into S. Korean stock market

Japanese investors have poured their money into South Korean stocks since April partly fueled by Japan's accommodative monetary policy, data showed Thursday.

According to the Financial Supervisory Service (FSS), Japan-based investors sold more Korean stocks than they bought in the January-March period, but they purchased a net 1.57 trillion won (US$1.52 billion) worth of them from April through Thursday.

The influx of Japanese funds into the local equity market in the May-August period averaged around 500 billion won. It is a sharp rise compared with a net buying of 528 billion won in 2010, the FSS noted.

Market watchers attributed the rising Japanese funds to the unprecedented quantitative easing by the government of Japanese Prime Minister Shinzo Abe, which allowed Japanese investors to borrow yen at a low interest rate and invest in overseas markets.

They also paid keen attention to the Japan Government Pension Investment Fund (GPIF) because the world's biggest pension fund with $1.3 trillion asset is preparing to shift away from low-yielding government bonds toward stocks and other riskier assets.

"GPIF announced its plan to reduce bonds and increase stocks in the portfolio," No A-ram, a researcher at Daewoo Securities, said.

"If GPIF raises the ratio of investment in emerging markets by 1 percent, it could bring about 1.9 trillion won to the South Korean stock market." (Yonhap)