In the seesaw market... Stock market standby funds losing their way

Investor Deposits Swell to 75 Trillion Won on January 27 Stock Market Crash
Largest Waiting Funds in 6 Months
LG Ensol Subscription Refunds Accumulate

[Asia Economy Reporter Ji Yeon-jin] Recently, as stock market volatility has increased, market standby funds have continued to remain cautious. Funds that flowed into the stock market for the subscription of LG Energy Solution (LG EnSol), considered the largest IPO in history, appear to be struggling to find direction amid the volatile market.

According to the Korea Financial Investment Association on the 4th, investor deposits reached 75.1072 trillion won as of the 27th of last month. Investor deposits refer to money entrusted to securities firms to purchase stocks and serve as market standby funds. Investor deposits set a record high in domestic stock market history by surpassing 77 trillion won on May 3rd last year. This was the day when refunds for SK IE Technology subscriptions, which allowed multiple subscriptions amid the IPO investment frenzy, were processed.

Investor deposits on the 27th of last month marked the highest level in six months since July 29th last year, when refunds for KakaoBank subscriptions were made, totaling 75.1675 trillion won. This amount is even larger than the 74.041 trillion won recorded on the 21st of last month, when refunds for LG EnSol subscriptions, the largest IPO to date, were processed. LG EnSol raised 114 trillion won in deposits during the general subscription held on the 18th and 19th of last month, rewriting the history of domestic IPOs. At that time, the market's attention was focused on the direction of tens of trillions of won in refunds following LG EnSol's listing. There were expectations that the refund funds would play a crucial role in supporting the domestic stock market, which had been weak due to concerns over U.S. monetary tightening and institutional selling.

However, on the day of LG EnSol's listing, the 27th of last month, the domestic stock market plunged sharply due to a massive sell-off by foreign investors, and it appears that these refund funds maintained a cautious stance rather than being reinvested. In fact, the KOSPI closed more than 1% higher the following day, and investor deposits fell to 70 trillion won. Nevertheless, this level is still significantly higher than last year. Before the COVID-19 market crash in March 2020, investor deposits hovered around 30 trillion won but surged rapidly as individual investors engaged in the so-called 'Donghak Ant Movement,' a stock investment craze. Even in early last year, when the KOSPI sharply rose and surpassed the all-time high of 3,300 points, investor deposits remained around 70 trillion won, but during the correction phase in the latter half of last year, they fell below 65 trillion won.

Lee Kyung-min, head of the investment strategy team at Daishin Securities, said, "Because the market is unstable, individual investors seem unable to invest in stocks and are taking a wait-and-see approach," adding, "There is also a characteristic of standby funds waiting for a bargain purchase." Lee Jae-man, head of the investment strategy team at Hana Financial Investment, also said, "Investor deposits are not a leading indicator of stock prices, but having a large amount of standby funds can be positive for the stock market."

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