S.Koreans flock to funds, liquid assets out of term deposits

South Korean companies and households flocked to investment funds and short-term deposits in December last year, pulling out of money market funds and term deposits, data from the Bank of Korea (BOK) showed on Friday.

With savings account interest rates on a steady decline, investors were left undecided on where to invest amid uncertainties about the timing of a policy shift toward monetary easing, said a BOK official.  

According to the central bank, 12.7 trillion won ($9.5 billion) flowed into investment funds in South Korea in December 2023.

Some 11.4 trillion won and 10.8 trillion won were channeled into checkable and demand accounts, respectively.

In contrast, 4.5 trillion won and 3.4 trillion won were outflowed from money market funds and time deposits.

“Stock, bond and derivative funds saw continuous money inflows and demand deposits attracted funds of some banks managing regulatory requirement ratios,” said the BOK official.

MONEY SUPPLY GROWTH

The balance of M2, a broader measure of money supply than M1, grew to 3,925.4 trillion won ($2,940 billion) as of the end of December last year, an increase of 29.7 trillion won, or 0.8% rise from a month before.

It marked the seventh straight month of increase since June 2023.

M2 consists of savings accounts with less than two years of maturity, money market funds and other types of investment vehicles, including certificates of deposit, repurchase agreements and financial debentures with two-year maturity or less.

M1 includes cash, demand deposits and other liquid assets. It added 2.0% to 1,225.4 trillion won in December from a month earlier, according to the BOK.

By economic entity, M2 for companies declined by 5.9 trillion won, while that of households and other institutions increased by 7 trillion to 13 trillion won, respectively.

Write to Jin-gyu Kang at josep@hankyung.com
 


Yeonhee Kim edited this article.