Hello, I am Jun Ji-hye, a reporter at The Korea Times. I primarily cover financial authorities and write articles on a wide range of topics related to finance and capital markets. If you have any information to share, feel free to email me at jjh@koreatimes.co.kr, and I will review it carefully. I am committed to always doing my best to communicate with readers through high-quality articles.
KOSPI's surge triggers rapid 'money move' from banks to stock market
A worker is seen in the dealing room at Hana Bank’s headquarters in Seoul, Friday, as the KOSPI rose for the third consecutive day to close above 4,100 points for the first time in history. The index finished the session at 4,107.50, up 20.61 points, or 0.50 percent, from the previous close. Yonhap
By Jun Ji-hye
Kim, a 34-year-old employee at a consulting firm in Seoul, recently withdrew 50 million won ($35,000) from his bank savings account and invested it in the stock market.
He said he felt the atmosphere had changed as the KOSPI surpassed 4,000 points while deposit rates remained in the 2 percent range.
“I decided it was better to invest in semiconductor- and artificial intelligence-related stocks with higher growth potential rather than leaving my money in the bank,” he said.
Like Kim, more individual investors are withdrawing funds from bank deposits and shifting them into equities as Korea’s main bourse, the KOSPI, has posted the world’s highest growth rate this year.
The KOSPI jumped about 19 percent in October alone, surpassing the 4,000-point mark for the first time. Each time the index hits a new record high, massive amounts of idle money flow into the capital market, further driving the rally.
According to industry officials, Sunday, the country’s five major commercial banks — KB Kookmin, Shinhan, Woori, Hana and NH NongHyup — saw their combined demand deposit balances fall by 28.5 trillion won at the end of October, compared with late September.
Demand deposits, which include checking and ordinary accounts, are short-term funds that can be accessed at any time, unlike time deposits.
Much of the money withdrawn from these accounts appears to have flowed into the domestic stock market.
Typically, when the stock market hits record highs, investor optimism fuels additional buying. Since mid-October, as the KOSPI neared 3,900 points, about 10 trillion won has been pulled from demand deposits.
The surge of capital into the market has also driven a rapid increase in equity fund assets.
Data from the Korea Financial Investment Association shows that domestic equity funds’ net assets reached 110 trillion won as of Oct. 24, surpassing 100 trillion won for the first time.
Supported by strong domestic fund performance, total equity fund assets, including overseas holdings, have overtaken real estate funds for the first time in six years. At the end of September, equity funds’ total net assets stood at 191 trillion won, edging past real estate funds, which totaled 190 trillion won.
As money pouring into the capital market accelerates, banks are raising interest rates on deposits to retain customers, a strategy aimed at keeping funds from risk-averse investors locked in.
According to the Korea Federation of Banks, the highest interest rates on one-year fixed deposits at the five major commercial banks recently ranged between 2.55 and 2.60 percent, moving above the low-2-percent level.