Chinese investors poured some 1.42 trillion won ($1.38 billion) into the South Korean stock market over the past six months, backed by ample liquidity and eased offshore investment regulations, to become the largest foreign net buyers of local shares, data showed Tuesday.
According to Hana Daewoo Securities Co., net purchases by Chinese investors have steadily risen from 30 billion won in December to 36 billion won in January and 42 billion won in February. The amount soared to 339 billion won in March, 669 billion won in April, and 296 billion won in May.
Chinese investors have been looking at offshore opportunities since Beijing in 2006 allowed licensed domestic institutions to invest overseas. They have been further boosted by eased liquidity from the 2008 stimulus package that followed the global financial crisis.
From January 2008 through May 2014, Chinese investors bought 8.3 trillion won worth of Korean stocks, trailed by Saudi Arabia with 6.4 trillion won and Canada with 2.3 trillion won.
Analysts say the injection of Chinese money has driven the heavy foreign buying in the Seoul bourse since April, offsetting investors from advanced economies who have been selling Korean shares to move to other emerging markets.
As Chinese institutions have set quotas under the Qualified Domestic Institutional Investors system, they may reduce the number of their Hong Kong shares to fill their portfolios with Asian stocks to reap more returns, said Han Jung-sook, a China researcher at Hana Daetoo Securities Co.
"Chinese investors see less benefit in investing in the Hong Kong market since the price gap between the mainland and Hong Kong equity markets is narrowing. There are possibilities of Chinese money flowing into other Asian countries or emerging economies," Han said.
As the mainland market remains stagnant due to strict financial regulations, Chinese funds will continue to flow into Korea, he said.
According to the Chinese central bank, more than 100 institutions are qualified to invest a combined quota of $76.80 billion overseas. In the January-March period, South Korea drew 5.8 percent of the quota, the third-largest amount after Hong Kong and the United States. (Yonhap)