Bank Deposits and Savings Saw 12 Trillion Won Outflow Last Year... Moving to Soaring Stock Market?

Massive Outflow of Deposits and Savings from 5 Major Banks... 7.6 Trillion KRW Sharp Decline Last Month
Demand Deposits as Waiting Funds Surge by 16 Trillion KRW
Accelerated Money Move Toward Stock Market Analyzed... Fund Concentration Raises Financial Risk Concerns

[Asia Economy Reporters Sunmi Park and Hyojin Kim] As the KOSPI surpassed the 3000 mark for the first time in history, the deposit and savings balances at the five major banks decreased by about 7.6 trillion KRW over the past month. This is the largest decline within a year, except for June last year. On the other hand, demand deposits, which can be moved at any time, saw an inflow of over 16 trillion KRW. Analysts suggest that this indicates an accelerating money movement phenomenon from low-interest deposit and savings accounts to the higher-yielding stock market.

According to the financial sector on the 6th, the total deposit and savings balance at the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 673.7286 trillion KRW at the end of last month, marking a sharp decrease of nearly 12 trillion KRW compared to a year ago. Especially since November, when the KOSPI's upward trend steepened, the decline has been significant. The deposit and savings balance in December dropped by 7.5832 trillion KRW compared to the end of the previous month. This is the largest monthly decrease in a year, except for June last year when 10.169 trillion KRW was withdrawn amid the real estate 'Yeongkkeul (borrowing to the limit)' buying frenzy.

Conversely, demand deposits, which serve as 'investment standby funds,' continued to increase sharply. The demand deposit balance at the five major banks reached 582.168 trillion KRW at the end of last month, a surge of 16.0567 trillion KRW from 566.1113 trillion KRW in the previous month. This marks the second consecutive month with an increase exceeding 16 trillion KRW, following a 16.383 trillion KRW rise in November.

After a temporary large-scale fund injection of 2.8581 trillion KRW in October due to public offering subscriptions, more than 32 trillion KRW has accumulated as standby funds. Demand deposits allow free deposits and withdrawals but offer low interest rates, making them a waiting place for funds that have no better destination.

An official from a commercial bank explained, "The accumulation of a large amount of money in standby funds can also be seen as an indication that money movement is accelerating," adding, "There are likely considerable funds weighing the timing to jump into the stock market." The official predicted, "As deposit and savings accounts lose their appeal due to the low-interest rate environment and liquidity expands to an all-time high, the phenomenon of money moving around will continue."

According to the Bank of Korea, as of the end of October last year, the money supply (M2 average balance) was 3,150.5 trillion KRW, up 34.7 trillion KRW (1.1%) from the previous month. Compared to the same period last year, it increased by 277.61 trillion KRW (9.7%). According to the Korea Financial Investment Association, investment deposits, which represent standby funds for the stock market, rose by about 4 trillion KRW to 65.5227 trillion KRW at the end of last month compared to the previous month.

Top 10-30% Income Group Expands Stock Holdings in Assets

In the market, there is a growing perception that investing in the rising stock and real estate markets is better than locking money in deposit and savings accounts with near-zero interest rates. According to a recent report titled 'Asset Management of the Mass Affluent' published by Woori Financial Research Institute, the most notable change in the asset portfolio of the top 10-30% income group was the expansion of stock holdings.

Among financial assets, the proportion of deposits and savings (45.0%) decreased by 5.0 percentage points compared to last year, while the stock proportion (15.4%) increased by 3.0 percentage points. The number of respondents holding stocks rose by 11.3%, from 1,862 in 2019 to 2,099 last year.

With liquidity widely released in the market due to the spread of COVID-19, concerns are emerging that the increase in 'investment standby funds' and the boom in the stock and real estate markets may continue for some time, potentially leading to financial market risks.

Song Minkyu, Senior Research Fellow at the Korea Institute of Finance, advised, "If risk factors such as declines in the value of financial assets like stocks, housing price drops, and household income reductions due to worsening employment occur simultaneously, they could spread into financial system risks and cause various localized problems. Therefore, detailed risk response measures are needed at this time."

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