Korean Treasury bonds held by Chinese investors rose 111 percent to 3.99 trillion won ($3.4 billion) in the first half of the year, data from the Seoul-based Financial Supervisory Service show.

China?s holdings of Treasuries fell 6 percent in the first half to $843.7 billion, Department of Treasury data released this week show, making it harder for President Barack Obama to finance record debt sales to sustain the U.S. economic expansion. Societe Generale SA predicts Chinese KTB purchases, which accounted for 19 percent of foreign inflows in the first half compared with 10 percent last year, will spur further gains.

China?s holdings of South Korean notes account for little more than 0.1 percent of its $2.45 trillion reserves. The increase in the first six months compares with $20.1 billion pumped into Japanese debt.
KTBs have handed investors a 5.6 percent return this year in dollar terms, delivering a profit every month, according to an index compiled by HSBC Holdings Plc. The advance marks the best winning streak since March 2007.

The value of KTBs owned by China totaled 1.87 trillion won on Dec. 31, up from 79.6 billion at the end of 2008, FSS data show. Foreigners? total holdings increased by 18.6 trillion won in 2009 and climbed 11.3 trillion to 67.8 trillion in the first half. That?s equivalent to 6.3 percent of South Korea?s outstanding government debt.

Source : Konaxis