"Disappointed by BigHit Bubble?"... Bank Time Deposits Attract Money for 3 Consecutive Months (Comprehensive)

[Asia Economy Reporter Jo Gang-wook] Last month, time deposits at major commercial banks surged by about 5 trillion won. Despite ultra-low interest rates dropping to the 0% range, time deposits have shown an increasing trend for three consecutive months in August, September, and October. This is interpreted as a result of expanded preference for safe assets amid growing concerns over economic uncertainty due to the prolonged COVID-19 pandemic and controversies over IPO bubbles.

According to the financial sector on the 5th, the balance of time deposits at the five major commercial banks?KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup?was recorded at 640.7257 trillion won last month. This is an increase of 4.9293 trillion won compared to the previous month (635.7964 trillion won).

The balance of time deposits at the five major banks had decreased for four consecutive months after reaching 652.3277 trillion won in March. The decline accelerated, with decreases of 2.7079 trillion won in April and 5.8499 trillion won in May, and an abnormal phenomenon occurred in June when over 10 trillion won (10.6785 trillion won) was withdrawn in just one month. In July, when COVID-19 somewhat eased, the decrease narrowed to 5.4259 trillion won, about half of the previous month, but still exceeded 5 trillion won, indicating a diminished appeal of time deposits.

This year, as bank deposit interest rates dropped to an annual 0-1% range, the attractiveness in terms of interest declined, leading investors to withdraw funds in search of better investment opportunities. The acceleration of the economic downturn due to COVID-19 also reduced the surplus funds that could be left idle in time deposits compared to before. Additionally, the craze for investing with borrowed money?known as 'debt investment (bit-tu)' and 'all-in investment (young-kkeul)'?also played a role.

Unusual Fund Movement into Bank Time Deposits Despite Ultra-Low Interest Rates
Funds Withdrawn by Debt Investment and All-In Investment Are Returning

Currently, the annual average interest rate for time deposits at the five major commercial banks is around 0.8-0.9%, down about 0.8 percentage points from 1.65% during the same period last year. This means that depositing 100 million won in a time deposit yields less than 1 million won in annual interest. According to the Financial Supervisory Service’s integrated financial product comparison disclosure site 'Financial Products at a Glance,' as of this date, among 49 time deposit products offered by 21 domestic banks, 35 products (71.4%) offer interest rates in the 0% range.

Despite such ultra-low interest rates, the surge in time deposits for three consecutive months?1 trillion won in August, 7 trillion won in September, and 5 trillion won in October?is interpreted as a sign that some of the funds that had withdrawn from bank deposits like an ebb tide due to the 'debt investment' craze are returning. In particular, dissatisfaction among investors who suffered losses has increased as the stock price of Big Hit Entertainment, which attracted over 58 trillion won, plunged sharply after its listing. Recently, a petition titled 'Please disclose how the IPO price of Big Hit Entertainment was determined' was posted on the Blue House’s public petition board. The so-called 'Big Hit Shock' and the ensuing IPO bubble controversy are also interpreted as factors influencing the return to safe assets.

Moreover, the resurgence of COVID-19 and uncertainties surrounding the U.S. presidential election are also seen as contributing factors, making it inevitable that volatility in the Korean financial market will expand for the time being.

A financial sector official said, "The surge of stocks trading below their IPO prices has intensified the stock market bubble controversy, which appears to have cooled the debt investment and all-in investment craze and led investors back to safe assets." He added, "Additionally, recent slight increases in deposit interest rates by banks, efforts to secure liquidity lost due to deposit declines, loan surges, and COVID-19 support measures likely also had an impact."

This content was produced with the assistance of AI translation services.