SEOUL, South Korea - China boosted its holdings of South Korean bonds last month even as lawmakers in Seoul reinstated a tax on interest income from debt securities.: j/ b; M# r# O! w0 Y
China's net purchases of Korean Treasury notes totaled 444 billion won ($395 million), 23 percent more than in December 2009, South Korea's Financial Supervisory Service said.9 y3 \9 }+ S. q" b" l
The addition more than tripled China's holdings of South Korean fixed-income securities to 6.57 trillion won at the end of last year. Net outflows by overseas investors were a record 5.3 trillion last month.7 K3 @9 H' c! y, i& l* W9 K3 x6 ^
"China was a net investor every month last year," the statement said. "We believe the record net outflows came from several factors, including the passage of a foreigner bond tax, the European debt crisis, a stronger dollar and year-end position adjustments."( @. {$ Q/ s" f
South Korea's parliament passed a bill in December that revived a tax of as much as 14 percent on interest income from treasury and central-bank bonds and a 20 percent levy on capital gains from their sale.
9 v$ h+ G# F- T, O } Officials from Latin America to Asia have tried to slow fund inflows and curb gains in their currencies since last year to protect exporters.( }( E+ g. Q& f; w; r9 i
South Korean bonds fell for a fourth day on Thursday. The yield on the 4 percent notes due in September 2015 increased seven basis points to 4.27 percent as of 1:25 pm on Thursday in Seoul, the highest level since Aug 18. A basis point is 0.01 percentage point. The won rose 0.2 percent to 1,123.95 per dollar.- T6 e- o' A( \6 [' B5 \# {; M! H
China is considering allocating more of its $2.65 trillion foreign-exchange reserves to emerging-market currencies to boost returns, central bank Governor Zhou Xiaochuan said in October./ |% X' O% Y' [6 ?: _
The nation should expand investment of its reserves in bonds and stocks, Zhang Monan, an economics researcher with the State Information Center, wrote in a commentary published on China Daily on Dec 30.
4 G/ ^( n4 ~& V( Y8 X, j China increased its holdings of US Treasuries for a fourth month in October to $906.8 billion, Bloomberg data show. The nation bought a net 262.5 billion yen ($3.1 billion) of Japanese bonds in October, Japan's Ministry of Finance said on Dec 8. |