Norway, China investors big S.Korea bond buyers in July

SEOUL Aug 3 (Reuters) - Norwegian and Chinese investors bought a combined net $1.73 billion worth of won bonds last month, data showed on Friday, as South Korean debt grew more popular among investors looking for both safety and yield.

Norwegian investors boosted their holdings of South Korean domestic bonds by a net 1.5 trillion won ($1.33 billion) last month, data from the Financial Supervisory Service showed, setting their biggest monthly net purchase on record.

An official at the South Korean financial market regulator said Norway's central bank was among investors from the Nordic country, but he could not provide a breakdown of the investors.

Norwegians have started buying South Korean won bonds in earnest this year and had bought only a net 0.8 trillion won worth until June, the data showed.

Chinese investors also boosted their holdings of won bonds by a net 446.6 billion won in July, which marked their biggest net increase since November 2010.

Won bonds rallied in July first on increasing expectations for an interest rate cut by the country's central bank and later on an actual reduction in the policy rate; then they rose on views that the central bank could further lower the policy rate.

Overall, foreigners' net investment in local bonds rose by 1.4 trillion won in July, indicating that total foreign holdings declined marginally when excluding the Norwegian and Chinese investors, the data showed.

South Korean benchmark 5-year treasury bonds yield 2.92 percent, far above the same-maturity of U.S. Treasury debt yielding about 0.63 percent.

In the South Korean stock market, foreign investors were net sellers of 710 billion won worth of stocks during July, with European and U.S. investors leading the way.

As of the end of July, foreign investors held 31.6 percent of local stocks in terms of value, compared with 31.2 percent the month before. Foreign holdings of South Korean bonds rose to 7.2 percent in July from 7.1 percent in June. ($1 = 1126.6250 Korean won) (Reporting By Se Young Lee; Editing by Jacqueline Wong and Choonsik Yoo)