In the New Year, 'Dakgong' Ants... Taking Fund Money Out for Stocks

Domestic and Foreign Equity Funds and MMF Capital Outflows
Direct Investments Increase Significantly

[Asia Economy Reporter Minji Lee] Individual investors are withdrawing money from equity funds to buy stocks directly.

According to the Korea Exchange and the Korea Financial Investment Association on the 1st, 1.0357 trillion won flowed out of the domestic and overseas equity fund market (excluding exchange-traded funds) last month. While overseas equity funds saw an increase of 1.0021 trillion won in assets under management, domestic equity funds experienced an outflow of 2.0379 trillion won.

There was also an outflow of funds from money market funds (MMFs). MMFs invest in short-term high-quality bonds such as government bonds and corporate commercial papers with maturities within one year, allowing for frequent deposits and withdrawals. They are used as a temporary place for investors who cannot find suitable investment destinations. The total size of MMFs increased by 29.8234 trillion won this month, mainly due to about 30 trillion won of corporate funds flowing into MMFs. However, individuals withdrew 353.2 billion won.

On the other hand, individual direct investments increased significantly. Since the beginning of the new year, individuals have purchased stocks worth 22.3384 trillion won in the domestic stock market. Despite foreigners and institutions selling 5.2154 trillion won and 17.3826 trillion won respectively during this period, increasing market volatility, the buying momentum of individuals did not weaken.

Individuals have been significantly increasing the proportion of stocks within their financial assets since last year. According to the Bank of Korea’s financial flow data, as of the end of September last year, individuals in Korea (including non-profit organizations) invested 22.5 trillion won in stocks (including funds), surpassing the previous record of 21.3 trillion won set in the previous quarter. This amount is comparable to the size of financial institution deposits (24.5 trillion won).

Kim Hoo-jung, a researcher at Yuanta Securities, said, "Due to the deepening low interest rates, individuals have no choice but to invest in stocks to improve returns, and the rise in asset prices such as real estate has increased the need to create seed money, thereby boosting demand for stock investment. Not only domestically but also globally in countries like the US, China, Japan, and Taiwan, the volatility of financial markets has increased since COVID-19, leading to a significant increase in individuals newly entering the stock market."

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