Offshore Korea Bond Trades Surge in Step Toward Index Inclusion
(Bloomberg) -- Offshore trades in South Korean bonds skyrocketed in August, potentially taking the country a step closer to its objective of joining a major international debt index.
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Overseas transactions via a so-called omnibus account rose to 367.5 billion won ($277 million) last month, up from just 20.4 billion won in July, according to data from the Korea Securities Depository. Omnibus accounts allow investors to process trades more conveniently, including via Euroclear Bank SA and Clearstream.
South Korea is bidding to join FTSE Russell’s World Government Bond Index as it seeks to upgrade its capital market and attract global investors, potentially attracting tens of billions of dollars worth of foreign inflows.
While the FTSE regional fixed income advisory committees are due to be consulted this week ahead of an announcement on Oct. 8, international trading and settlement of debt securities has become a sticking point.
Analysts at Goldman Sachs Group Inc. said earlier this month that use of Euroclear was an important prerequisite for joining the WGBI gauge and that more progress was probably needed before Korea would get a green light from the index provider. The US bank therefore sees the country’s accession delayed until 2025, according to a Sept. 4 report.
KSD said the amount of 367.5 billion won wasn’t equal to the 26 transactions on Euroclear that Bloomberg reported on earlier this month, based on finance ministry data. While KSD declined to say how many transactions the 367.5 billion won constituted, it did say that while the number of trades was still limited, the size of each trade had increased.
--With assistance from Balazs Penz.
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