-- Bank of Korea isn't selling euro assets due to euro-zone woes, its
forex reserve group chief investment officer says
-- The central bank is looking to riskier assets for higher returns, he says
-- The BOK plans to buy Chinese shares, bonds up to quota limits; aims
to get quota raised, he says
-- Current gold holdings too small, BOK may buy more this year, he says
(Recasts the first paragraph.)
By In-Soo Nam
SEOUL--The Bank of Korea is holding on to its euro reserves despite
the financial turmoil in the euro zone, and is looking to invest in
riskier assets in emerging markets to earn higher returns as part of a
move to diversify its portfolio, a senior official at the central bank
said Wednesday.
Eugene Kim, chief investment officer at the central bank's
foreign-exchange reserve management group, said the BOK plans to
increase investment in Chinese yuan-denominated securities. He also
said its gold holdings are "too small" given the size of its forex
reserves, which stood at a record-high of $310.87 billion at the end
of May, and that the BOK might buy more bullion this year.
"Some people say we might be selling the euro, which has weakened
because of the debt troubles in the region. But we don't. Private
funds or hedge funds might do, but not central banks," Mr. Kim told
Dow Jones Newswires in an interview.
"Stable and safe operation of the reserves is the goal of any central
bank. And the Bank of Korea has been very good at that. It now has
room to turn its eyes to riskier assets for higher returns," said Mr.
Kim, who joined the BOK in March after managing assets for 10 years at
Samsung Asset Management Co.
He said the BOK isn't currently investing in the Brics nations except
for China, but it is closely looking for opportunities in other Asian
and Latin American countries--such as Indonesia, Malaysia, Thailand,
India, Brazil and Mexico--from a long-term perspective.
While the central bank hasn't started buying yuan-denominated shares
since it obtained approval from the Chinese authorities in January to
buy $300 million worth, Mr. Kim said it plans to use up the quota by
the end of next month, although completing the purchase could be
slightly delayed.
He also said the BOK recently bought more Chinese treasurys since its
first purchase in April, after it gained another license in January to
buy up to CNY20 billion ($3.2 billion) of yuan-denominated bonds.
"We'll steadily buy Chinese treasurys up to our limit by the end of
this year. After that, we plan to seek approval from China to increase
our investments in Chinese securities," Mr. Kim said.
He added that "in the U.S., we are already buying mortgage and other
financial securities in addition to safe-haven Treasurys, which offer
relatively low yields."
He said there wouldn't be drastic changes in the composition of
currencies and products in the BOK's forex reserves.
According to the BOK's latest data, the proportion of dollar holdings
in its portfolio fell last year to the lowest since 2007, as the
central bank moved to diversify its reserves amid a decline in the
value of the greenback. As at end-2011, U.S. dollar-denominated assets
accounted for 60.5% of South Korea's total forex reserves, while other
currencies such as the euro, yen and pound made up the remaining
39.5%.
Mr. Kim said the central bank needs to boost its gold holdings even
after two purchases last year that took the amount to 54.4 metric
tons, or about 1% of the total reserves.
"Unlike other financial instruments, gold doesn't produce interest.
But given its symbolic presence and usefulness as a safe haven in
times of crisis, the BOK needs to buy more. We may do so this year,"
he said.
Write to In-Soo Nam at in-soo.nam@dowjones.com
(END) Dow Jones Newswires
June 20, 2012 06:55 ET (10:55 GMT)
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