Due to Weakness in Stock and Bond Markets... Funds and MMFs Attract Capital

Average Daily Trading Value of Individual Investors in Stock Market Declines for 4 Consecutive Months
Domestic Equity Public Funds Including ETFs See Net Inflow for 4 Consecutive Months
24.4 Trillion Won Inflow into MMFs in One Month

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] As the stock and bond markets show weakness, funds are flowing into funds to entrust money to experts. Money market funds (MMFs) and other standby funds are also on the rise.

According to the Korea Exchange and the Korea Financial Investment Association on the 7th, the average daily trading value of individual investors in the KOSPI and KOSDAQ markets last month was 15.972 trillion won. This is the smallest scale since May last year, when it was 15.5227 trillion won. The average daily trading value of individual investors has been declining for four consecutive months since recording 20.5 trillion won in June.

The decrease in the investment scale of individual investors is due to the domestic stock market showing weakness. Recently, concerns have arisen in the domestic stock market that corporate earnings may be sluggish due to supply chain disruptions.

Accordingly, funds are flowing into indirect investments such as funds to avoid stock market volatility. Last month, 1.2536 trillion won flowed into domestic equity public funds, including exchange-traded funds (ETFs). On a monthly basis, this marks four consecutive months of net inflows, totaling 3.1434 trillion won during this period. This is the first time since October 2018 to January 2019 that four consecutive months of net inflows have been recorded.

Funds are also flowing into domestic equity active public funds. According to financial information provider FnGuide, 423.2 billion won flowed into domestic equity active public funds over the past three months. Active funds are financial products in which fund managers actively implement management strategies to pursue excess returns. Last year, they were neglected due to a preference for direct investment following the stock market rebound and the private equity fund incident.

The domestic bond market is also showing weakness, leading to outflows from bond-type funds. The assets under management of domestic bond public funds peaked at 36.3 trillion won on June 14 and decreased to 32.6 trillion won as of the 4th of this month.

Instead, standby funds are increasing. According to FnGuide, the assets under management of MMFs reached 138.4 trillion won on the 4th, with an inflow of 24.4 trillion won in one month. MMFs invest in short-term financial products such as negotiable certificates of deposit (CDs), commercial papers (CPs), and bonds with maturities of less than one year, allowing funds to be deposited and withdrawn at any time. It is interpreted that funds are flowing into MMFs due to the seasonal characteristic of fund inflows at the beginning of the month amid expanding market volatility.

If expected returns in the stock market decrease and upward pressure on interest rates in the bond market continues, corresponding fund movements are expected to follow. Recently, governments around the world, including the U.S. Federal Reserve (Fed), which had increased liquidity, are proceeding with monetary policy normalization, and inflation concerns are emerging due to supply chain disruption issues.

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