Potential Risk of Foreign Investment Outflow in South Korea Due to Delayed U.S. Rate Cuts

SEOUL — South Korea may experience a withdrawal of foreign investment from its financial market if the anticipated rate cuts in the United States are postponed, a report from the Korea Center for International Finance (KCIF) suggested on Saturday.

According to Yonhap News Agency, while the current global monetary policy shifts and the upcycle in the information technology sector, notably semiconductors, have created a conducive environment for foreign capital inflow, there remains a significant risk of outflow. This risk hinges on the timing of a "soft landing" for the U.S. economy and the initiation of rate cuts by the U.S. Federal Reserve. The report highlights the importance of monitoring these external economic indicators closely as they play a crucial role in the stability and attractiveness of South Korea's financial market to foreign investors. Despite the upward trend in foreign investment in South Korea, with significant net purchases of stocks and bonds in recent months, the disparity in interest rates between the U.S. and South Korea since September 2022 poses a potential threat to sustained foreign investment levels. The KCIF emphasizes the need for vigilance and strategic economic planning to mitigate the impact of global monetary policy o n South Korea's market.

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