Amid Market Volatility, "Ready to Fire Anytime"... Demand Deposits at Top 5 Banks Exceed 700 Trillion Won, Overdraft Balances Surpass 41 Trillion Won

As of May 12, demand deposits at the five major banks exceed 703 trillion won
Decoupling from the KOSPI trend: funds prepared for market downturns and IPO participation
Credit loan and overdraft balances also rise, fueling competition to secure

Recently, while individual investors have responded to net selling by foreign investors in the KOSPI market with net buying, the balance of demand deposit accounts at major commercial banks has actually increased. This is a departure from the usual pattern, where demand deposit balances typically decrease when the KOSPI index rises and increase when the index falls. Notably, both credit loans and overdraft account balances have risen simultaneously, leading analysts to suggest that individual investors are proactively securing "investment ammunition" to defend against a falling market and to participate in initial public offerings (IPOs).

Demand Deposits Surpass 700 Trillion Won... Inverse Correlation with the KOSPI Index Collapses

According to the financial sector on May 15, the combined balance of demand deposit accounts (including MMDA accounts with free withdrawals and deposits) at the five major commercial banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at 703.0875 trillion won as of May 12, an increase of 6.535 trillion won compared to the end of the previous month. This is the first time in 47 months that the balance has surpassed 700 trillion won, the last time being in June 2022 (725.6808 trillion won).

What stands out is that the relationship with the KOSPI index is now different from the past. In the early days of the stock market money move phenomenon, it was clear that demand deposits decreased as the KOSPI index rose and increased as it fell. Recently, however, even as the index continues to hit new highs, the balance of demand deposits has either remained steady or even increased.

In fact, the balance of demand deposits at the five major banks dropped sharply from 674.0084 trillion won in December of last year to 651.5379 trillion won at the end of January this year, then surged to 684.8604 trillion won at the end of February and 699.9081 trillion won at the end of March. At the end of April, it slightly decreased to 696.5525 trillion won, but the decline was not significant. In contrast, during this period, the KOSPI index soared from the 4,200 level at the end of December last year to the 5,200 level at the end of January, skyrocketed to 6,244.13 at the end of February, then plummeted to 5,052.46 at the end of March, before surging again by over 1,500 points to 6,598.87 at the end of April. Even this month, the index has surpassed the 7,000 mark and is attempting to break through the 8,000 level, continuing its strong trend. Yet, demand deposit balances have not decreased; instead, they have reached their highest level in four years, approaching an all-time record.

Individuals Increase Deposits Even While Absorbing Supply

Unlike in the past, when individuals would draw down their demand deposits to absorb foreign investor selling, deposit balances have recently remained robust. For example, during the initial stages of the Middle East war, from March 4 to 18, when individual investors absorbed foreign selling and pushed up the index (KOSPI 5,093.54 to 5,925.03), demand deposits fell by about 12.7 trillion won to 672.1447 trillion won.

However, this month, the trend has changed. On May 4 and 6, when foreign investors' net buying pushed the index higher for two consecutive days, demand deposit balances increased to 696.1055 trillion won and 699.1204 trillion won, respectively. In particular, from May 7 to 12, during four consecutive trading days of net selling by foreigners and net buying by individuals and institutions, the balance further increased to 703.0875 trillion won. During the same period, the balance of time deposits and savings accounts also increased by 75.78 billion won, from 1,009.4543 trillion won to 1,010.2121 trillion won.

Banks: "IPO Craze and FOMO Are Fueling Leverage Investments"

The banking sector interprets this trend not as a halt in the outflow of funds from the stock market, but rather as an increase in "strategic waiting funds" in preparation for market volatility. The decisive factor has been the influx of short-term funds into an overheated IPO market since the end of April. Recently, several companies have seen blockbuster IPO subscriptions, drawing large amounts of capital: wearable robot maker Cosmo Robotics (subscription ratio 2,013.27 to 1, deposit of 6.2981 trillion won), baby product specialist Poled (3,169.86 to 1, deposit of 5.2 trillion won), and industrial AI developer MakinaRocks (2,807.8 to 1, deposit of 13.9 trillion won).

The simultaneous increase in demand deposit and loan balances further supports this trend. As of May 12, the combined balance of credit loans at the five major banks stood at 106.4183 trillion won, up 2.077 trillion won from the end of the previous month (104.3413 trillion won). Overdraft account balances also rose during the same period, from 39.5904 trillion won to 41.3053 trillion won, hitting a 40-month high.

A banking sector official commented, "Even after accounting for temporary corporate deposits, it is highly unusual to see demand deposits, credit loans, and overdraft balances all increase during a stock market boom. This suggests that funds realizing gains are returning to banks to wait on the sidelines, while those who have not yet entered the market are experiencing FOMO (Fear of Missing Out), leading to increased leverage as competition to secure investment ammunition intensifies."

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