[Edaily Reporter Lee Jeong-yoon ] As concerns over the profitability of artificial intelligence (AI) investments have grown, foreign investors have continued to withdraw funds from the domestic stock market for two consecutive months. In particular, in October, while outflows from the stock market increased, bond investments saw a net inflow, resulting in divergent trends in foreign investment flows.

◇ Stock Outflows Widen Amid AI Concerns… Bonds Shift to Net Inflows

According to the “Trends in International Finance and Foreign Exchange Markets Since October 2026” report released by the Bank of Korea on the 12th, foreign investment in the domestic stock market saw a net outflow of $19.31 billion last month. The scale of the outflow expanded by $5.15 billion (36.4%) compared to September ($14.16 billion).

Foreign investment in domestic stocks, which had seen a net inflow of $40 million in August, shifted to a net outflow in September and has continued to exit the domestic stock market for two consecutive months.

The Bank of Korea explained, “The scale of net outflows of foreign capital from the domestic stock market expanded as investor sentiment weakened due to concerns over the monetization of global AI investments, among other factors.”

Indeed, in international financial markets, stock prices—particularly for technology stocks—fell as concerns mounted over the funding burden associated with AI investments and the possibility of tighter regulations on data centers following the U.S. midterm elections. On the 5th, the U.S. Nasdaq Index plunged 5.5%, and the Philadelphia Semiconductor Index dropped 12.2%.

In contrast, foreign bond investment saw a net inflow of $5.61 billion, marking a return to inflows for the first time in four months. Although there was a net outflow of $5.81 billion in September, the trend reversed within just one month.

The inflow of bond funds was driven by index-tracking capital inflows following inclusion in the World Government Bond Index (WGBI) and improved incentives for foreign investors to invest in domestic bonds. In fact, the short-term arbitrage incentive shifted from -39 basis points (bp) in August and -31 bp in September to +2 bp in October.

Consequently, foreign investment in domestic securities—combining stocks and bonds—recorded a net outflow of $13.7 billion in October. The scale of the outflow decreased by $6.27 billion compared to September ($19.97 billion). Total securities investment has recorded net outflows for nine consecutive months since February.

◇ Exchange Rate Falls Despite a Strong Dollar… Volatility Also Declines

Although foreign capital flowed out of the stock market on a large scale, the won-dollar exchange rate actually fell. At the end of last month, the exchange rate stood at 1,334.3 won, down 18.5 won from the end of September (1,352.8 won). During the same period, the U.S. Dollar Index (DXY), which measures the dollar’s value against the currencies of six major countries, rose from 101.5 to 101.9. This means that despite the global strength of the U.S. dollar, the won actually appreciated against the dollar.

The Bank of Korea explained, “Factors such as increased dollar sales by exporters contributed to the decline in the exchange rate,” but added, “The rise in the U.S. Dollar Index and concerns over the monetization of AI investments limited the extent of the decline.”

Exchange rate volatility also decreased compared to the previous month. The average daily fluctuation in the exchange rate in October, compared to the previous day, was 4.6 won, a decrease of 2.4 won from September (7.0 won). The average daily fluctuation rate also fell from 0.52% to 0.34%.

The volume of domestic interbank foreign exchange transactions increased slightly. The daily average foreign exchange transaction volume in October was $55.42 billion, up $130 million from September ($55.29 billion). This was due to an increase in foreign exchange swap transactions, despite a decline in spot foreign exchange transactions.

Meanwhile, domestic banks’ conditions for external foreign currency borrowing generally remained favorable. The spread on short-term external borrowing fell from 27 basis points in September to 18 basis points in October, while the credit default swap (CDS) premium on foreign exchange stabilization bonds rose slightly from 22 basis points to 24 basis points over the same period.