November 5, 2012 / 3:00 AM / 5 years ago

Foreigners buy S.Korean bonds in Oct, Chile steps up purchases

SEOUL, Nov 5 (Reuters) - Foreigners' net investment in South Korean bonds rose for the second consecutive month in October as the Chilean central bank increased its exposure to won-denominated debt, South Korean government data showed on Monday.

Net foreign inflows to the local debt market totalled 361 billion won ($330.93 million) last month, the Financial Supervisory Service (FSS) said, despite 2.7 trillion won in redemptions for debt that matured.

Investors from Chile were the biggest investors, buying 555 billion won worth of the debt. An FSS official said the Chilean central bank started buying local debt in September and did so again in October, without elaborating on how much the authority has bought.

Chile's central bank is the latest of foreign central banks that have begun investing in local debt as South Korea's strong economic fundamentals have led to a series of sovereign ratings upgrades between August and September.

Norway's sovereign wealth fund and Switzerland's central bank also continued to increase their holdings in South Korean bonds in October, the FSS official said, underscoring growing investor confidence in local debt as a safehaven.

But Chinese investors sold a net 351.6 billion worth of local bonds in October, marking the first decline since May. This was also the biggest decline on record in Chinese investors' holdings in South Korean debt.

Foreigners sold 1.1 trillion won worth of local stocks during the month on profit-taking following the Korean won's recent appreciation as well as renewed concerns about the global economy.

This translated to a net 741 billion won in total foreign outflows from local securities in October, marking the first such fall since June. ($1 = 1090.8750 Korean won) (Reporting By Se Young Lee; Editing by Jacqueline Wong)

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