Foreign investors swung to massive net selling of Korean stocks in February as mounting inflation threats and political uprisings in Arab countries put a damper on sentiment, the financial regulator said Thursday.

Foreigners pulled 3.7 trillion won ($3.3 billion) of Korean shares out of the local bourse last month, compared with net buying worth 1.4 trillion in January, the Financial Supervisory Service said in a statement.

The February selling ended foreigners’ five-month net buying streak and marked the heaviest selloff since the 6.1 trillion won net selling seen last May, when fears of eurozone debts sparked risk aversion, according to the FSS.

“The February turnaround came due to growing inflation jitters in emerging countries and an oil price surge, triggered by Middle East concerns,” the regulator said.

As of the end of February, overseas investors owned 30.5 percent, or 363.6 trillion won, of the country’s total stock market cap, the regulator added.

Meanwhile, foreign investors’ net holdings of Korean bonds rose for the first time in three months in February after investors from the U.S. and Luxembourg turned to net buyers.

The increase in bond holdings came amid concerns over a possible increase in interest rates in South Korea, recent changes to regulations affecting capital flows and unrest in the Middle East, the FSS said.

Korean bonds held by foreign investors increased by a net 254.9 billion won ($227 million) to 74.19 trillion won as of Feb. 28, the regulator said. Foreign investors’ net sales of Korean bonds totaled 441.7 billion won in January and 5.3 trillion won in December, according to the statement.

U.S. investors were the biggest buyers of bonds in February, with their holdings increasing by a net 508.7 billion won, according to the statement. Thailand was the biggest seller, with net sales of 971.4 billion won, the regulator said.

Meanwhile, foreign investors turned to net buyers of local bonds last month, although their buying reached only a small amount due to nagging concerns over interest rate hikes and the country’s cross-border capital control stance, the regulator noted.

Overseas investors bought a net 254.9 billion won worth of domestic bonds last month, compared with net selling of 441.7 billion won in January, according to the FSS.

As of end-February, foreigners held 74.2 trillion won in local bonds, or 6.6 percent of the total outstanding bonds listed on the bourse, it added.

(From news reports)