Global investors pulled a record amount of capital from South Korean financial markets in March as rising geopolitical tensions in the Middle East reinforced a broader shift away from risk assets and into safer holdings. According to the Bank of Korea, net foreign outflows from equities and bonds combined reached $36 billion, the largest monthly total on record.
The bulk of the retreat came from equities, where foreign investors sold a net $29 billion of South Korean stocks, marking the steepest monthly equity outflow in available data. The selling reflected a wider reassessment of exposure to risk sensitive markets as global portfolios adjusted to heightened geopolitical uncertainty and tighter financial conditions.
South Korea’s bond market also saw a reversal in flows, with $6 billion in net foreign outflows. The central bank pointed to maturing government bond positions and weaker incentives for carry trade strategies, which reduced reinvestment demand compared with the prior month.
The movements came alongside increased volatility in the won. The average monthly fluctuation in the currency reached $0.01, while volatility rose to 0.76 percent, underscoring how capital outflows were transmitted into foreign exchange markets.
While triggered by conflict in the Middle East, the scale of the outflows also reflected a broader repositioning in global portfolios, where emerging and export oriented markets such as South Korea tend to experience sharper capital adjustments during periods of elevated risk aversion.
