Bank of Korea begins buying Chinese treasuries on OTC market

SEOUL - Bank of Korea (BOK), South Korea's central bank, said Friday that it began buying China's government bonds on the over-the-counter (OTC) market after being approved to purchase such bonds in January.

According to the BOK, the South Korean central bank bought the Chinese government bonds in the interbank bond market for the first time on Tuesday, around three months after the People's Bank of China (PBOC) granted the BOK to purchase as much as 20 billion yuan ($3.2 billion) worth of such bonds in January.

The bank said that it purchased China's government bonds in the OTC market as part of efforts to diversify its foreign reserves, noting that it will build up its Chinese yuan portfolio gradually.

Meanwhile, the BOK was approved to buy as much as $300 million worth of listed stocks and bonds on the Chinese financial market for the Qualified Foreign Institutional Investor (QFII) in March.

The central bank has not exercised its right yet to buy Chinese stocks and bonds listed on the bourse. "On the Chinese OTC market, we can buy directly bonds, but we should select asset managers to trust our fund for the QFII. We are on the course of selecting the managers," an official at the BOK told Xinhua.