Capital Market Trends
It has been found that the short-term floating funds in the Korean capital market reached a new high of approximately 666 trillion won, which can be attributed mainly to the low interest rate trend, housing and stock market slowdown as of late, etc. The size is unlikely to decrease for a while with the domestic economic outlook showing no signs of recovery yet.
The Bank of Korea and the Korea Financial Investment Association announced on February 18 that the short-term floating funds added up to 666.3626 trillion won as of the end of December last year. The sum is divided roughly into: 44,173.8 billion won in cash; 112,677 billion in demand deposits; 313,159.8 billion won in money market savings deposits; 45,763.5 billion won in money market funds; 20,337.2 billion won in certificates of deposit; 36,203.6 billion in cash management accounts; 6,928.7 billion won in repurchase agreements; 70,440 billion won in time deposits; and 17, 750 billion won in stock investors’ deposits. The MMF portion does not include those held by the government and non-residents.
The total quantity had skyrocketed from 540 trillion won to 647 trillion between late 2008 and late 2009. As of the end of 2010 and 2011, it totaled at 653 trillion and 650 trillion won, respectively.
It is because investors are having hard time finding investment options as the economic recession lingers on that the size of such funds is rarely decreasing. As of February 15, the average interest rate of the 38 one-year time deposit products provided by the 16 commercial banks in Korea was 3.0%. The housing market is showing no signs of revitalization in spite of the government’s different policy measures, either. The stock market is expected to be drifting sideways for the time being around 2,000 points as well due to the weak yen trend.