The report published by the Bank of Korea said most offshore investors did not budge an inch over the fluctuating interest rate gap between South Korea and the US in the 2008-2017 period.

Only private investment banks sought higher returns, pulling their money out of the South Korean debt market when short-term rate gaps narrowed.

"Before the 2008 global financial crisis, private banks' capital accounted for more than half of the South Korean bond market. It was a big risk factor," said report author Kim Soo-hyon, an economist at the BOK. "But as global financial regulations have tightened, the portion of such short-term capital has dropped to less than 5 percent nowadays."

Kim said investors were sensitive to foreign reserves of major economies like the US, Japan and Brazil, as well as global financial risk factors.

In September, for example, foreign investors became net sellers for the first time in nine months, dumping a net $1.98 billion worth of local shares.

At that time, the global financial market was hit by the escalating US-China trade dispute and economic jitters in some emerging nations like Turkey and Argentina.

"We have to keep close tabs on external risks, as overseas financial instability may cause a sudden foreign outflow from the market," said the author. (Yonhap)