Foreign stock funds suffer continuing outflows

Stock funds that invest in overseas securities have suffered massive outflows over the past five years as investors drawn by an earlier stock boom in emerging markets exited to reduce losses after being spooked by the financial crisis in late 2007, data showed Monday.

Foreign stock funds posted a total outflow of 29.19 trillion won (US$28.09 billion) from July 2009 to August 2014. On a monthly basis, such funds have suffered a capital outflow for 62 straight months, according to the data compiled by the Korea Financial Investment Association (KOFIA).

So far this year, investors have pulled a net 2.04 trillion won out of such funds. Last month alone, some 279 billion won were withdrawn, the data showed.

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

Some 1.95 trillion won has been pulled out of the BRIC funds so far this year.

Analysts said a recent rise in the Chinese stock market was making investors who had poured massive money into China funds in late 2000 demand fund redemptions.

The Chinese stock market has climbed recently on hopes that the Chinese government will further ease policies to support growth.

The Shanghai Composite Index, the mainland's benchmark, has gained some 15 percent since June, and the Hang Seng Composite Index in Hong Kong has risen some 9 percent.

"Investors funneled money into China funds right before the financial crisis but suffered massive losses in the wake of the crisis," said Kim Hu-jung, an analyst at Tong Yang Securities. "They are tempted to narrow their losses whenever the China market buildup gains momentum. And demand for foreign stock funds is waning due to taxation on gains from foreign stock funds." (Yonhap)