Korean retail investors' U.S. bond net-purchases quadruple on year in H1

South Korean retail investors’ holdings of U.S. debts jumped by four times in the first half of this year versus a year ago on growing demand for safer assets amid heightened recession worries, data showed on Wednesday.

Net purchases of U.S. treasuries and corporate bonds by Korean mom and pop investors amounted to $1.35 billion in the first six months of this year, up 312.54 percent from a year earlier, according to Korea Securities Depository data analyzed by Maeil Business Newspaper.

In contrast, their net buying of U.S. stocks came to $11.88 billion, down 7.11 percent in the same period.

The data show a capital flight to safe havens from risky assets as domestic investors fret over an economic downturn as the global monetary tightening is accelerating following the U.S. Federal Reserve’s bold move to make a big step interest rate hike to tame runaway inflation.

Bonds have become popular investments for retail investors lately in a high interest rate environment, said Shin Hwan-jong, NH Investment & Securities’ FICC Research Center Head. The higher the rate, the lower the bond price. This is a right time to diversify Korean retail investors’ investment portfolio that has been heavily focus on stocks, Shin added.

More investors shifted their eyes to U.S. debts after the yield on the 10-year U.S. Treasury note, which serves as a guideline for long-term interest rates in the market, crossed the 3 percent range in May, and the yield on blue-chip corporate bonds jumped to over 4 percent, said Yoo Dong-won, Head of Global Asset Allocation at Yuanta Securities.

As U.S. corporate bonds attract investors, some Korean securities companies began to expand their bond dealing services for local customers. On June 17, NH Investment & Securities launched an online platform to allow investors to buy and sell Apple and Amazon debts and it plans to add more, including Alphabet and Johnson & Johnson bonds, to its platform within this year.

Samsung Securities is introducing an online trading system for U.S. corporate bonds by the end of August. Samsung Securities account holders can currently buy and sell those bonds only at the company’s branch offices.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]