Seo Eun-jong, Head of Global Markets at BNP Paribas Seoul Branch, stated on the 29th that foreign investor interest in the Korean won and won-denominated assets has reached its highest level since he began trading in 2002. In an interview, Seo assessed the government's won internationalization roadmap, emphasizing that the policy's core keyword is 'roadmap,' signaling a long-term, gradual approach rather than overnight institutional changes. He noted that the government has maintained a consistent directional approach across Korea's three core financial markets — bonds, equities, and foreign exchange — with the won internationalization initiative building on prior achievements such as WGBI inclusion and Euroclear linkage.
BNP Paribas Executive Highlights Long-Term Policy Consistency
Seo described the government's approach to the bond, equity, and foreign exchange markets as "very consistent in terms of directional policy stance." He stated that the bond market was internationalized first starting with WGBI inclusion and Euroclear linkage, while equity market improvements over the past two years are now reflected in trading volumes and foreign ownership ratios. According to Seo, the foreign exchange market was already embedded in bond and equity initiatives, but this announcement provided more concrete details. He emphasized that the most critical keyword is "roadmap," indicating a long-term commitment rather than immediate implementation. Seo added that the announced measures are not final and will be updated and revised through second and third phases, with direction and commitment taking priority over speed.
Foreign Investor Interest in Won Assets Hits 23-Year High
Seo stated that 2026 has seen the strongest foreign investor response to the won and won-denominated assets since he started trading in 2002. He reported that during an investor trip in May, 12-15 foreign institutions visited Korea directly for a tour, followed by visits to five overseas cities. During meetings with the Asia strategist group, Seo noted that when holding one-hour client meetings, over 30 minutes were typically devoted to "Korea" discussions. He said the first question was about KOSPI, the second about the Korean won, and the third about KTB (Korean Treasury Bonds). Seo remarked that he could not recall a time when interest in Korea was this intense. He also observed that domestic portfolios, previously concentrated in deposits and real estate, are diversifying into financial markets, driving heightened domestic interest as well.
WGBI Inclusion Drives Monthly Inflows Exceeding 10 Trillion Won
Seo reported that monthly foreign bond fund inflows have been substantial, with 7-8 trillion won per month from March, rising to over 10 trillion won in May and June. He characterized WGBI inclusion as the beginning — not the conclusion — of a three-year effort, reflecting a long-term perspective. Seo cited remaining market development tasks including foreign investor participation in the repo market, activation of KOFR (Korea Overnight Financing Repo Rate), and opening of the credit bond market. He confirmed that the WGBI hedge ratio has remained at a low level of 10-20% as expected, indicating that a significant portion of incoming funds are being converted into won. Seo stated that the increasing volume of funds is helping to support the won's value.
NDF-to-DF Conversion Expected to Progress Gradually
Seo expressed agreement with the government's policy direction of providing strong incentives for deliverable forwards (DF), but cautioned that the transition will not happen overnight. He cited two examples of emerging market currencies that converted to deliverable formats: China took approximately five years to transition its CNY NDF market to the offshore spot market (CNH), while Malaysia eliminated its NDF market in 2016 in a single move, which caused significant confusion and volatility during position liquidation. Seo, who was an Asia emerging market currency trader at JP Morgan London at the time, recalled that there were many pros and cons among foreign clients and side effects from increased volatility. He stated that Korea's approach of providing gradual incentives for deliverable forwards over a transition period is correct. Seo noted that Korea's integrated onshore-offshore deliverable market is more advanced than China's offshore CNH model, necessitating a longer timeframe. He emphasized the need to continuously inform customers that DF can be used more cost-effectively than NDF.
Won Exchange Rate to Converge Toward Fundamentals in H2
Seo stated that the dollar-won rate's rise to 1,560 won in the first half was not solely driven by speculative forces. He noted that overseas funds running speculative positions viewed the won favorably through May, citing strong current account balances and equity market performance. According to Seo, the unexpected factor was foreign investor rebalancing flows, with cash outflows totaling 80-90 billion dollars. He explained that even assuming a 10% hedge ratio on foreign equity holdings, passive funds adjusting hedge ratios through NDF or forwards would have generated substantial dollar buying demand. Seo confirmed that mechanical rebalancing and hedge ratio adjustments were significant supply-demand factors throughout the first half, but stated that the market is now entering a reversal phase and finding balance. He expressed the view that the won will converge toward fundamentals in the second half, noting that current foreign ownership ratios in the overall market and in Samsung Electronics and SK Hynix are approaching equilibrium levels compared to 10-year averages. Seo characterized the current won level as "attractive" and stated that it is "a good level for foreign investors to buy won-denominated assets."
FAQ
What did Seo Eun-jong say about foreign investor interest in Korean won assets on the 29th?
Seo Eun-jong, Head of Global Markets at BNP Paribas Seoul Branch, stated on the 29th that foreign investor interest in the Korean won and won-denominated assets has reached its highest level since he began trading in 2002. He reported that during May investor meetings, over 30 minutes of one-hour sessions were devoted to Korea discussions, covering KOSPI, the Korean won, and Korean Treasury Bonds.
How much WGBI inclusion fund inflow has Korea received according to BNP Paribas?
According to Seo Eun-jong, monthly foreign bond fund inflows were 7-8 trillion won from March, rising to over 10 trillion won in May and June. He confirmed that the WGBI hedge ratio has remained at a low 10-20% level as expected, indicating that a significant portion of incoming funds are being converted into won, which helps support the won's value.
Why did the dollar-won exchange rate rise in the first half according to the BNP Paribas executive?
Seo Eun-jong stated that the dollar-won rate's rise to 1,560 won was not solely speculative. He identified foreign investor rebalancing flows as the unexpected factor, with 80-90 billion dollars in cash outflows. Passive funds mechanically adjusting hedge ratios through NDF or forwards generated substantial dollar buying demand throughout the first half, but Seo noted that the market is now entering a reversal phase and finding balance.
