February 27, 2013 / 7:46 AM / 4 years ago

UPDATE 2-South Korea Jan current account shows yen impact muted

4 Min Read

* Exports rise, current account hits record in Jan

* Foreign portfolio investment sees net outflow

* No sign yet of hot money inflow after yen slide: analysts (Updates throughout)

By Christine Kim and Choonsik Yoo

SEOUL, Feb 27 (Reuters) - The impact on South Korean exports and capital markets from the yen's dramatic slide has so far been limited, data showed on Wednesday, attributed by analysts to Seoul's capital controls and fragile global investor sentiment.

Bank of Korea current account data showed exports in January jumped a seasonally adjusted 7.2 percent from the month before, more than recovering a 3.2 percent loss in December, while foreigners pulled a net $1.4 billion out of stock and bond markets.

The export growth against a slight fall in imports helped Asia's fourth-largest economy post a record seasonally-adjusted current account surplus of $6.52 billion in January, more than double a $3.00 billion surplus in December.

The yen has plunged 15 percent against the dollar between September and January -- the worst in 18 years for any four months -- on Japan's moves to end deflation by printing more new money, stirring tensions with mostly emerging economies worried about massive capital inflows as a result.

"The moves by Japan came only after similar monetary policy easing in the United States and Europe had already funnelled investment money into emerging markets," said Jeong Young-sik, research fellow at Samsung Economic Research Institute.

"I don't see any solid sign of massive hot-money inflows because of Japan's policy," he said, while adding the fragile situation in Europe and depressed credit demand within South Korea offset the advantages of short-term investment in this market.

Relatively Calm, Until Now

Foreign portfolio investment in South Korea averaged a net $755 million per month between October and January, sharply down from a net $2.75 billion per month on average for the preceding 12 months, Bank of Korea data showed.

An official at the central bank, who refused to be identified because he was not authorised to talk to media on market trends, agreed there was no sign of foreign fund inflows growing since the yen's slide started.

South Korea has imposed three sets of measures aimed at curbing the inflow of borrowed money from abroad in recent years to avoid the repeat of a 1997 currency crisis that had been sparked when a rush of hot-money inflows reversed direction.

The relatively stable fund flows across the border despite the yen's tumbling will now likely give South Korea's new president some time to watch and wait before imposing additional capital-control measures, analysts said.

"The president will probably keep making warnings of new measures but I don't think it will come at any time soon," said Jeong My-young, currency strategist at Samsung Futures.

President Park Geun-hye, sworn in this week to be the country's first female leader, has said earlier her government would take pre-emptive action if the won's appreciation got out of control and fund flows quickened.

The won jumped about 4 percent against the yen this year on top of a 23 percent gain last year, but it was trading slightly weaker than the end of last year against the dollar on depressed domestic stock prices.

Low credit demand among South Koreans living with a weak property market and uncertain economic prospects has also contributed to relatively tame fund inflow at a time when interest rates are low.

Seoul's stock market has also been hit by expectations that U.S. fund manager Vanguard would sell a few billion dollars in South Korean stocks after its switch from the MSCI index to the FTSE to track markets for its emerging-market funds. (Editing by Eric Meijer)

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