Waiting Funds Increased in the Volatile Market

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Junho] Money is flowing into short-term financial products such as money market funds (MMFs). Although various financial products like public funds and insurance have been canceled, the amount of funds unable to find a place due to increased stock market volatility is growing.

According to the Korea Financial Investment Association on the 10th, as of the 8th, the amount of short-term financial products investing in domestic assets stood at 139.584 trillion won. This increased by about 10 trillion won from 129.8249 trillion won on the 1st of this month and rose by about 18 trillion won compared to the 8th of last month.

Short-term financial products refer to ultra-short-term corporate bond-type products that concentrate investments so that fluctuations in short-term effective interest rates are quickly reflected in fund returns. The representative example is MMFs.

The amount of short-term financial products is analyzed to be gradually increasing as stock market volatility grows. The KOSPI surpassed the 3,000 mark on the 7th of last month and even rose to 3,200 (on the 25th), but also dropped to the 2,900 level (on the 29th). In particular, controversies surrounding domestic and international stock short selling, such as the U.S. GameStop incident, and delays in the effectiveness of COVID-19 vaccines have increased uncertainty about the stock market.

From the investor's perspective, as it becomes increasingly difficult to gauge the direction of the stock market, concerns about returns inevitably grow. When the stock market surged sharply from October last year to last month, investors boldly engaged in direct investment, but with increased volatility this month, they have become hesitant to invest directly.

An asset management industry official said, "Recently, although insurance and savings deposits have been canceled, it has become difficult to engage in direct investment, so standby funds are increasing," adding, "Branches are recommending investments in exchange-traded funds (ETFs) that invest in secondary batteries or indexes, which are easy to redeem."

As the burden of direct investment grows, the number of investors eyeing equity funds is also increasing. The amount invested in domestic equity funds, including ETFs, reached 51.2097 trillion won, increasing by about 1.1263 trillion won compared to a month ago. Investments in bond funds also increased by about 370 billion won.

According to financial information company FnGuide, funds such as Korea Investment Global Electric Vehicle & Battery Securities Investment Trust (equity), Korea Investment Credit Focus Securities Investment Trust 1 (bond), Multi-Asset Global Clean Energy Securities Investment Trust (equity), Asset One Public Offering KOSDAQ Venture Securities Investment Trust 4 (equity-mixed derivative type), and Mirae Asset Core Tech Securities Investment Trust (equity) saw increases in their assets under management by more than 100 billion won.

Hwang Sewoon, a research fellow at the Capital Market Research Institute, said, "As stock market volatility increases, standby funds for the stock market are also continuously growing," adding, "The amount of public fund subscriptions is gradually increasing." He analyzed, "This is the result of investors who lack confidence in direct investment showing interest in relatively safer funds."

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