Bond funds’ cash drops amid stock rally

Bond funds suffered a massive cash outflow in the past month due to a bull run on the local stock market and investors’ rebalancing of their assets, industry data showed Sunday.

According to the data from market tracker FnGuide, 275 bond-focused funds had 33.68 trillion won ($28.14 billion) worth of assets under management as of Wednesday, down 561 billion won from a month ago.

Stock funds also delivered some 857 billion won in cash outflow over the cited period, but in the past week, such funds have absorbed 505 billion won, the data showed.

The cash outflow from bond funds is noticeable as such funds have soaked in some 11 trillion won amid increased uncertainty and hopes for rate cuts, while investors pulled money out of stock funds, data showed Sunday.

Increased economic uncertainty, stemming from the escalating American-Sino trade dispute, along with another trade conflict between Seoul and Tokyo, had prodded investors to park their money in the safer bond funds.

Also, the prospect of rate cuts in South Korea and other major economies fueled cash inflows into the bond funds.

Analysts said investors seem to have cashed in part of gains built up since early this year.

Korea’s exports have dropped for 10 consecutive months, since December.

The Bank of Korea (BOK) is set to further cut its growth outlook for the year after slashing it to 2.2 percent in July and 2.5 percent in April.

The central bank delivered a surprise move to cut the base rate by 25 basis points to 1.5 percent in July 18, marking its first rate cut in more than three years.

The BOK board is set to hold its next rate-setting meeting later this month, with many expecting another rate cut given the increased downside risks.