Abstract
Global investors’ investment in local currency bonds, especially Korea Treasury Bonds, has increased significantly since the mid-2000s, and their influence on bonds and financial markets has grown consistently. In this paper, we investigate global investor’s priority of decision factors in investing in Korea Treasury Bonds by distributing a pairwise comparative survey to experts and analyzing the results using the analytical hierarchy process technique. For analysis, we created model frames with experts in the field of investment based on literature analysis, selected survey participants by considering their institution of their employment, work experience and region, and obtained responses. We find that investors with short-term investment propensities are more sensitive to international and domestic factors and less to risk factors, and more heavily influenced by U.S. dollar funding conditions. On the other hand, investors with long-term investment tendencies are found to be more sensitive to international and risk factors as opposed to domestic factors, and influenced by: global policy rate decisions and fiscal soundness, sovereign credit rating, possible global economic recession, and geographical risks. Our findings not only contribute to enhancing investors’ understanding of the Korean bond market by discussing consensus among investors, but also provide policy implications for Korean government policymakers who need stable and sustained funding.
Highlights
This study aims to identify the decision factors that affect investments in local currency (LCY)bonds, and the factors that global portfolio investors consider in investing in KoreaTreasury bonds (KTBs), and provide implications for the Korean government to proactively manage financing risks and raise funds in a sustainable manner.Since the Asian financial crisis of the late 1990s, global investors’ investments in emerging economies have increased dramatically and their influence in the financial markets has expanded (Lavigne et al 2014)
As market volatility increased during the global financial crisis, the outflow of global investment funds in a short period of time unnerved most emerging countries’ financial markets and economy (Asian Development Bank 2018)
100%A(Albayrak and Claire priority is the Erensal calculation of primary weights using the analytical hierarchy process (AHP)’s pairwise comparison, which local determines the degree of weights for each variable in a AHP’s pairwise comparison, which determines the degree of weights for each variable in a percentage percentage format that to2100% (Albayrak and Claire Erensal 2004)
Summary
Since the Asian financial crisis of the late 1990s, global investors’ investments in emerging economies have increased dramatically and their influence in the financial markets has expanded (Lavigne et al 2014). This contributed greatly to reducing the currency imbalance between emerging economies’ assets and debt and increasing the maturity of national debt, which eventually provided stable financing to the market and increased the efficiency of capital allocation (Peiris 2010; Kim and Jung 2015). As market volatility increased during the global financial crisis, the outflow of global investment funds in a short period of time unnerved most emerging countries’ financial markets and economy (Asian Development Bank 2018)
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