Net foreign portfolio outflows reached $19.97 billion, compared with $4.50 billion in August, according to data released Friday by the Bank of Korea (BOK).
Equity funds swung back to a net outflow of $14.16 billion after a marginal $40 million inflow in August, while bond outflows widened to $5.81 billion from $4.53 billion.
The BOK attributed the reversal in equity flows to rising global long-term rates and concerns over a slowdown in AI investment.
For bonds, the central bank pointed to maturities of Korea Treasury Bonds and weak reinvestment as short-term arbitrage incentives remained negative.
The three-month arbitrage incentive stood at minus 31 basis points on average in September, following minus 39 basis points in August and minus 26 basis points in July.
Foreign portfolio investment has now recorded net outflows for eight consecutive months since February.
Cumulative outflows through September reached $147.05 billion, driven almost entirely by $145.03 billion in equity outflows.
The U.S. 10-year Treasury yield climbed to 5.28 percent at the end of September from 4.75 percent at the end of August before easing to 5.19 percent on Oct. 14.
The won nevertheless strengthened despite the persistent portfolio outflows.
The won closed at 1,352.8 per dollar at the end of September, up from 1,368.6 at the end of August, and strengthened further to 1,338.3 on Oct. 14.
The BOK said the dollar-won rate initially rose as geopolitical uncertainty in the Middle East increased and expectations for further Federal Reserve tightening strengthened, before reversing as exporters stepped up dollar sales.
Currency volatility also increased, with the average daily movement in the dollar-won rate widening to 7.0 won in September from 4.4 won in August and the average daily percentage change rising to 0.52 percent from 0.31 percent.
Despite the sustained securities outflows, the BOK assessed overseas funding conditions for Korean banks as broadly favorable.
The premium on short-term external borrowing edged up 1 basis point to 27 basis points in September, while the premium on medium- and long-term borrowing fell 5 basis points to 40 basis points.
The five-year credit default swap premium on Korea's foreign exchange stabilization bonds remained unchanged at 22 basis points.
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