Savings Deposits Increase by 42.4 Trillion KRW in Q1 This Year... Reverse Money Move Begins in Earnest

[Asia Economy Reporter Seo Sojeong] Amid rising interest rates, a 'reverse money move' is gaining momentum, with market funds shifting from risky assets such as stocks to stable bank deposits and savings.

According to the '2022 Q1 Financial Flow (Provisional)' statistics released by the Bank of Korea on the 6th, the net fund operation scale in the domestic sector shrank to 16.4 trillion KRW compared to 26.3 trillion KRW in Q1 of last year.

The net fund operation amount of households (including self-employed individuals) and non-profit organizations was recorded at 60.4 trillion KRW, an increase of 9.3 trillion KRW from 51.1 trillion KRW in Q1 of last year.

The scale of net operation into financial assets expanded compared to the same period last year due to increased household income from COVID-19 support funds and a slowdown in housing investment.

As loans from financial institutions decreased, the scale of fund procurement shrank significantly to 22.7 trillion KRW from 53 trillion KRW in Q1 of last year.

Fund operation in Q1 this year was 83.2 trillion KRW, down from 104 trillion KRW in Q1 of last year. Savings deposits and money trusts increased by 42.3 trillion KRW and 6.4 trillion KRW respectively, greatly expanding their growth compared to the previous year, while bonds (-10.6 trillion KRW) and stocks (+16 trillion KRW) contracted.

Looking at the proportion of products within household financial assets, deposits accounted for the highest at 41.8%, followed by stocks at 20.1%, and bonds at 2.1%.

Comparing the stock proportion within household and non-profit financial assets by country, Korea stood at 20.8% as of the end of last year, lower than the United States (40.3%) and France (24.1%), but higher than Germany (12.6%), the United Kingdom (11.7%), and Japan (10.8%).

For non-financial corporations, the net procurement scale expanded as demand for working capital increased due to rising raw material prices. Fund procurement expanded mainly through non-bank working capital loans, along with increased fundraising through stock issuance such as IPOs and paid-in capital increases.

Corporate loans in Q1 this year increased by 49.5 trillion KRW, expanding from 22.6 trillion KRW in Q1 of last year, and stock issuance also increased by 21 trillion KRW, up from 19.5 trillion KRW in Q1 of last year.

Fund operation was 42.8 trillion KRW, down from 44.1 trillion KRW in Q1 of last year, mainly due to a decrease in deposits such as money trusts.

The government's net procurement scale expanded as government consumption increased due to active fiscal spending, including supplementary budgets for COVID-19 response.

Bang Jung-kwon, head of the Financial Flow Team at the Bank of Korea's Economic Statistics Bureau, said, "While the increase in savings deposits and money trusts has expanded compared to the same period last year, bonds and stocks have contracted, showing a reverse money move phenomenon."

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