South Korea Leads Record $53.3 Billion Foreign Equity Outflow from Asia

Foreign investors pulled a record amount of capital from South Korean equities in June, leading a broader exodus from Asian markets as concerns over technology sector valuations and rising interest rates intensified.

Record Outflows Hit Asian Markets

South Korea recorded $30.5 billion in foreign equity outflows in June, the largest monthly withdrawal on record for the country, according to a report from ANZ Research. The flight from Korean stocks was part of a wider regional trend that saw investors pull capital from other major markets.

Key figures for June include:

• Asia (ex-China): A total of $53.3 billion in foreign equity outflows, more than double the $25.6 billion withdrawn in May.
• South Korea: A record $30.5 billion in outflows.
• Taiwan: $18.3 billion in outflows, reversing two straight months of inflows.

Tech Slump and Rate Hikes Drive Selloff

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The heavy selling reflects growing investor caution. Khoon Goh, Head of Asia Research at ANZ, attributed the outflows to "valuation concerns after the equity market's strong run this year and index-related rebalancing."

These concerns were amplified in Seoul after the Bank of Korea raised interest rates, contributing to a sharp decline in the KOSPI index that was severe enough to trigger a sidecar trading curb. The outflows from Taiwan similarly underscore a broader reassessment of the global technology outlook, as its market is heavily concentrated in semiconductor stocks.

Divergence with Bond Markets

Despite the sharp exodus from equities, regional debt markets continued to attract foreign capital, highlighting a growing divergence in investor sentiment between asset classes. South Korea’s bond market, for example, saw net inflows of $2.2 billion in June.

ANZ Research suggests this demand was sustained by persistent index-related buying. This indicates that while investors are shedding risk in stocks, demand for the country's fixed-income assets remains intact for now.