Slowing Increase in Deposits... Stock Market Leadership in Foreign Hands

[Asia Economy Reporter Hwang Junho] As the growth of investor deposit funds slows down, there is a forecast that the lead in stock market fund inflows will shift from individuals to foreign investors.

According to the Korea Financial Investment Association on the 8th, as of the 6th, investor deposit funds recorded 69.5906 trillion won. Starting the year at 68.2873 trillion won, the deposit funds surged to 77.9018 trillion won on May 3 but fluctuated and fell back to the 70 trillion won range by the end of last month, showing no signs of rising again. Deposit funds increased 2.2 times from 29 trillion won at the end of 2019 to 68 trillion won at the end of 2020.

This year, the deposit funds exceeded the 70 trillion won mark partly due to an unusually high number of mega initial public offerings (IPOs). However, the funds injected for IPO subscriptions did not affect the index, and deposit funds tended to drop from the 70 trillion won range to the 60 trillion won range after the IPO schedules ended.

This trend is likely to strengthen further. Recently, with the Bank of Korea raising the base interest rate and tightening loan regulations in the financial sector, the inflow of individual funds into the stock market is inevitably shrinking.

In the securities industry, it is expected that as individual demand weakens, there will be a change in the lead of supply and demand from the fourth quarter. It is forecasted that foreign investors will take the place of individuals. If the tapering (asset purchase reduction) schedule is concretized around the Federal Open Market Committee (FOMC) meeting in November, preferences for risk assets, dollar weakness, and won strength are expected to increase. If this happens, the conditions for foreign investor inflows into the domestic stock market will improve, and the upward momentum of the index driven by foreign investors is likely to strengthen toward the end of the year.

Kim Seheon, a market researcher at Kiwoom Securities, said, "Individual buying power will play a role in securing the downside rigidity of the index through bargain buying rather than acting as a strong driving force for the stock market's rise as it did last year." On the other hand, he analyzed, "Foreign investors are expected to show a full-fledged inflow of funds from the fourth quarter, when concerns about tapering, inflation, and peak-out are expected to ease."

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