Household Deposit Ratio Hits Highest Since 2011 Amid Interest Rate Rise... Stock Ratio Sees Largest Decline

44% of Financial Assets in Deposits, Stocks Reduced to 18%

Last year, due to the sluggish stock market and consecutive interest rate hikes, the preference for safe assets became more pronounced, with the proportion of deposits in household and nonprofit financial assets reaching 43.5%, the highest since 2011. As household funds flowed into relatively high-yield and safe savings deposits and bonds, the scale of stock management, which had reached an all-time high, shrank significantly.

According to the '2022 Financial Flow (Provisional)' statistics released by the Bank of Korea on the 6th, the net fund operation amount of households and nonprofit organizations was 182.8 trillion won, an increase of 35.9 trillion won from the previous year. The net fund operation amount is the value obtained by subtracting the fund procurement amount from the fund operation amount of the economic entity.

Consumption increased mainly in large-scale services, but as income rose significantly, the scale of net operation into financial assets expanded compared to the previous year (146.9 trillion won).

Breaking down fund operations by sector, household equity securities and investment funds shrank sharply to 18.6 trillion won from 95.9 trillion won the previous year, which was close to 100 trillion won. Excluding investment funds, households operated 40.6 trillion won in domestic and foreign stocks last year, a sharp decrease compared to 112.9 trillion won in 2021, when the Donghak and Seohak ant investor booms occurred.

On the other hand, household savings deposits surged from 82.2 trillion won to 182.9 trillion won.

Last year, as household funds flocked to deposits with high interest rates, the proportion of deposits among financial assets expanded to 43.5% from 41.0% the previous year. This is the highest level since 2011 (45.1%). The stock proportion dropped by 3 percentage points to 17.8% from 20.8% in 2021, the highest ever, marking the largest decline on record.

Moon Hye-jung, head of the Financial Flow Team at the Bank of Korea's Economic Statistics Bureau, said, "Due to the sluggish stock market, rising interest rates, and preference for safe assets, operations centered on stocks, demand deposits, and other deposits (such as securities institution deposits and subscription deposits) were reduced," adding, "Operations of savings deposits and bonds, which have relatively high yields and safety, expanded." She explained that as stock trading decreased and stock prices continued to fall last year, households actively shifted their investments from stocks to deposits.

Additionally, households procured a total of 80.6 trillion won last year, a sharp decrease from 193.3 trillion won the previous year. Financial institution borrowings (loans), which account for most of the fund procurement amount, also plunged from 189.6 trillion won to 66.8 trillion won. This was due to rising loan interest rates, continued loan regulations, and a slowdown in the housing market, which significantly reduced procurement centered on deposit-taking institutions' loans.

For non-financial corporate enterprises, the net procurement scale last year expanded significantly to 175.8 trillion won from 66.3 trillion won in 2021. This is the largest net procurement amount since the statistics began in 2009. The increase in working capital demand due to rising raw material prices and exchange rates greatly expanded the net procurement scale. Moon added, "Although stock issuance decreased due to deteriorating direct financing conditions, procurement increased mainly through public enterprise bond issuance and private company loans."

The government's net procurement scale also expanded from 11.1 trillion won to 39.3 trillion won within a year. Although national tax revenue increased, government expenditure rose significantly due to fiscal spending for COVID-19 response, expanding the net procurement scale.

Meanwhile, the total financial assets, which represent the sum of financial assets held by all economic sectors shown in the financial flow statistics, stood at 2,341.61 trillion won at the end of last year, increasing by only 542.5 trillion won from the previous year, significantly reducing the growth rate. This is the lowest increase since the statistics were compiled.

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