S. Korea central bank to lift investment in China

South Korea’s central bank promised yesterday to gradually increase investments in yuan-denominated assets after being given a licence to invest in Chinese stocks and bonds.
The Bank of Korea said it has secured China’s qualified foreign institutional investor (QFII) licence, which allows it to buy stocks and bonds traded on the Shanghai and Shenzhen stock markets.
The licence will help the central bank diversify its foreign exchange reserves, which reached USD 306.4 billion at the end of December, the seventh-largest in the world.
The bank said its investment would be gradual and there would be no major change in the composition of currencies in its foreign-exchange holdings.
A number of South Korean groups have been seeking entry into China’s markets, and this month the state-run National Pension Service – with about 346 trillion won (USD 303 billion) under management – received a QFII licence.
The central bank has also increased its gold holdings in a bid to hedge against global volatility caused by European and US debt crises.
Gold has become increasingly attractive to central banks worldwide, and prices have risen sharply since the global financial crisis as it is considered a safe haven, while a weaker dollar makes it even more attractive.