KOSPI 3000 Era... Money Withdrawn from Bank Savings and Time Deposits Waiting in Parking Accounts (Comprehensive)

Massive Outflow of Deposits and Savings from 5 Major Banks... 7.6 Trillion KRW Drop 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 3,000-point mark for the first time in history, the combined balance of savings and time deposits at the five major banks decreased by approximately 7.6 trillion KRW over the past month. This is the largest decline in a year, except for June of 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 savings and time deposits, which have lost their appeal due to ultra-low interest rates, to the stock market, which offers higher returns.

According to the financial sector on the 6th, the total balance of savings and time deposits 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 decline of nearly 12 trillion KRW compared to a year ago. Especially since November, when the KOSPI's upward trend was steep, the decrease has been significant. The balance of savings and time deposits in December fell by 7.5832 trillion KRW compared to the end of the previous month. This is the largest monthly drop in a year, except for June last year when 10.169 trillion KRW was withdrawn amid a real estate 'Yeongkkeul (borrowing to the limit)' buying frenzy.

Conversely, demand deposits, which serve as 'investment standby funds,' continued to increase sharply. The balance of demand deposits 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 in standby accounts. 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 said, "The accumulation of a large amount of money in standby accounts 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 savings and time deposits lose their appeal due to the low-interest-rate environment and liquidity expands to an all-time high, the phenomenon of money floating around will continue."

According to the Bank of Korea, the money supply (M2 average balance) stood at 3,150.5 trillion KRW at the end of October last year, 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 Bracket 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 savings and time deposits 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 bracket was an increase in the proportion of stocks.

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

With liquidity widely released into the market due to the spread of COVID-19, concerns are growing that the increase in 'investment standby funds' and the boom in the stock and real estate markets may continue for some time. Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki and Bank of Korea Governor Lee Ju-yeol have jointly warned from the beginning of the new year about the 'liquidity concentration' phenomenon in asset markets and are closely monitoring the situation.

In particular, household debt exceeded the country's gross domestic product (GDP) for the first time last year, raising concerns that liquidity concentration could lead to financial market risks.

Senior Research Fellow Min-gyu Song of the Korea Institute of Finance advised, "If risk factors such as declines in the value of financial assets like stocks, housing price drops, and reduced household income 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.