Retail investors flock to bond investments


By Anna J. Park

Retail investors have been flocking to the bond market throughout this year, resulting in an all-time high in bond purchases.

According to the latest figures by the Korea Financial Investment Association (KOFIA) on Monday, the aggregated amount of bonds purchased by individual investors from January to last Friday reached 26.3 trillion won ($19.7 billion), a record-high annual figure. The amount already surpassed 20.6 trillion won, the total amount of bonds purchased by retail investors last year.

By category, retail investors injected money the most into government bonds worth 8.95 trillion won, followed by corporate bonds at 6.9 trillion won, other financial bonds at 5.5 trillion won and bank bonds at 3.3 trillion won.

The global markets’ high-interest rate environment and prevailing investor perception that the interest rate is near its peak have played a major role in the boosted bond investment by retail investors. Another key factor of the growth is ascribed to popularized online bond investment processes on mobile trading systems.

Furthermore, the government announced last week the proposed amendment to the Enforcement Decree of the State Bond Act, which will take effect from early next year, allowing individual investors to make investments into Korean government bonds ranging from 100,000 won with maturity options of 10 years and 20 years available.

While retail investors can already investment in bonds for as little as 1,000 won at a local brokerage firm, the new state bond will differ in that the bond will solely be issued for individual investors by the government. As it will be a principal-protected product with tax benefits, bond investment will be an integral part of retail investor portfolios with easier access than ever before.