3% Range Parking Accounts Are a Thing of the Past... Money Move Stirring

The 'money move' trend, where market funds shift to asset markets such as stocks due to falling market interest rates, is gaining momentum.

According to the financial sector on the 21st, the demand deposit turnover rate of domestic deposit banks in the first quarter of this year was recorded at 17.6 times per month. This is the highest level since the first quarter of 2020 (18.4 times per month), when the COVID-19 pandemic began in earnest.

The deposit turnover rate refers to the amount of deposit payments divided by the average deposit balance. A high deposit turnover rate indicates that companies and households frequently withdrew money deposited in banks for consumption or investment.

The demand deposit turnover rate of deposit banks had been declining due to various domestic and international adverse factors since the fourth quarter of 2019, when it recorded 19.2 times, but has somewhat increased since the end of last year amid growing expectations of easing monetary tightening. The demand deposit turnover rate in the fourth quarter of last year was 17.1 times, and especially in December, due to relatively high deposit interest rates and seasonal characteristics with high fund demand, it reached 19.9 times on a monthly basis.

This year, the demand deposit turnover rate showed a downward trend with 17.9 times in January and 16.8 times in February, but rose again to 18.2 times in March. A financial sector official said, “The amount of deposit payments in the first quarter increased significantly compared to the third quarter, when the turnover rate was at its lowest,” adding, “Although it has not reached pre-COVID-19 levels, it shows a flow where fund demand is recovering to some extent.”

The rise in the deposit turnover rate is due to expectations of easing monetary tightening along with a downward trend in market interest rates. For example, the interest rates on parking accounts at internet-only banks (Kakao Bank, K Bank, Toss Bank), which once guaranteed up to 3.0% annually, have recently dropped to around 2.00?2.60%. This is even lower than the yield of 2.95?3.60% offered by the recently popular issued promissory note-type Cash Management Accounts (CMAs).

The fixed deposit interest rates, which attracted idle funds last year, are also losing relative appeal. Looking at the one-year fixed deposit interest rates (simple interest) of the four major commercial banks (KB Kookmin, Shinhan, Hana, Woori), the highest preferential interest rates applied range from 3.47% to 3.56%, staying around the base rate (3.50%).

Meanwhile, market funds are flowing into short-term financial products. According to the Korea Financial Investment Association, as of the 11th, the CMA balance reached 65.7 trillion won, up 13.1% from the beginning of the year. Although it is still difficult to say that the stock market is booming, investor deposits also increased by 16.3% from the yearly low to about 50.15 trillion won.

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