SEOUL, April 3 (Reuters) - Foreign central banks continued to increase their holdings of South Korean bonds in March, the country's financial regulator said on Wednesday, even as tensions with North Korea intensified.
Foreigners' net investment in Korean debt rose by 1.49 trillion won ($1.34 billion) last month following February's 3.53 trillion won in net inflows, the Financial Supervisory Service (FSS) said in a statement.
An FSS official, who declined to be identified, said the central banks of Kazakhstan, Malaysia, Switzerland, Taiwan and Thailand as well as the Norwegian sovereign wealth fund continued to increase their holdings in won-denominated debt but did not give details.
The data shows that Korean bonds have yet to lose their lustre despite heightened geopolitical tensions as North Korea escalates its verbal attacks and threats against the South and the United States.
The regulator attributed the foreign inflows to investors' search for safe haven assets and bets that the Bank of Korea will cut interest rates in the near term.
Bond investments by Thais rose by a net 458 billion won in March, while net investment by Chinese investors rose by a net 316 billion won. Net investments from Kazakhstan and Malaysia rose by 124 billion won and 123 billion won, respectively.
The central bank kept the benchmark rate unchanged at 2.75 percent in March, but is widely expected to deliver a 25 basis-point cut this month in conjunction with efforts by the new administration of President Park Geun-hye to jumpstart the economy.
The FSS official said some foreign central banks were looking to diversify their foreign currency reserves, as well.
Meanwhile, foreigners sold 1.91 trillion won worth of Korean stocks due to heightened risk aversion stemming from the standoff with North Korea and renewed worries about the euro zone.
In total, foreigners pulled out a net 422 billion won from local stocks and bonds in March.
($1 = 1114.8000 Korean won)
(Reporting by Se Young Lee; Editing by Kim Coghill) Keywords: KOREA ECONOMY/FOREIGN FUNDS
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