SEOUL Jan 7 Net foreign portfolio investment in South Korean markets in December fell by the sharpest amount in six months, data from a financial regulator showed on Tuesday, driven by stock outflows after the Federal Reserve said it would begin to taper stimulus.
Foreigners took out a net 1.86 trillion Korean won ($1.76 billion) from local stocks and bonds in December, the Financial Supervisory Service (FSS) said, the biggest decline since a net 2.59 trillion won worth of outflows in June.
Offshore investors took out 1.49 trillion won from the stock market in December, which also was the biggest outflow in six months. The FSS said this drop was largely due to the Federal Reserve's decision to start reducing its bond purchases.
Foreigners also took out 371 billion won from the bond market, marking the fifth consecutive month of outflows, as 3.25 trillion won in redemptions on matured debt wiped out 2.88 trillion won in net purchases.
Norwegian investors bought 529 billion won worth of local bonds in December, however, while net investment by Swiss investors rose by 385 billion won. Net investment from Israel also rose by 183 billion won last month.
The FSS did not disclose details on these investments, but Norway's sovereign wealth fund as well as the central banks of Switzerland and Israel have been buying won-denominated debt to increase their exposure to the Korean currency.
Chinese investors, however, took out 110 billion won from the local debt market in December.
For all of 2013, foreign net portfolio investment rose by 8.19 trillion won, easing sharply from a net 25.03 trillion won rise seen in 2012.
($1 = 1055.1500 Korean won) (Reporting by Se Young Lee; Editing by Jacqueline Wong)