Stand-by Funds
The amount of investor deposits that can be used to buy stocks surpassed the 26 trillion won (US$23.15 billion) mark last month, reaching a record high. As the benchmark Korea Composite Stock Price Index (KOSPI) went through the roof, standby funds to purchase stocks and subscribe to funds have reached the largest ever.
According to the Korea Financial Investment Association (KOFIA) on August 1, investor deposits stood at 26.87 trillion won (US$23.93 billion) as of July 27, breaking the largest-ever record of 26.18 trillion won (US$23.31 billion) on June 17 last year. The figure went down to 25.41 trillion won (US$22.63 billion) on the next day on the 28th but it still increased by more than 1.5 trillion won (US$1.34 billion) in a month, showing a continuous growth.
Investor deposits, which are cash deposited to purchase stocks or funds in brokerage accounts by investors, amounted to 26.06 trillion won (US$23.21 billion) on July 26. The figure rose by 807.5 billion won (US$719.06 million) in a day after surpassing the 26 trillion won (US$23.15 billion) mark for the second time, breaking the previous largest-ever record. When the KOSPI surpassed the 2,400 mark, showing a rapid growth, a large amount of money is rushing in for stock investment.
Recently, comprehensive stock standby funds, including investor’s deposits, exchange derivative products deposits, consignment sale accounts receivable, repurchase agreements (RP) sale balances, also showed a significant rise. The figure totaled 106.65 trillion won (US$94.97 billion) on July 27, up 3.84 trillion won (US$3.42 billion) in July alone. It was the second largest amount after 108.39 trillion won (US$96.52 billion) on July 4 last year.
In addition, the balance in stock collateral loans, which general investors take out loans from securities firms for stock investment, soared to an all-time high of 8.67 trillion won (US$7.72 billion) as of July 27.
Some say that it is due to the rapid increase in investor deposits as the repurchase of stock funds has continued to realize a profit. This is because the amount of fund repurchases is reflected in the rise of investor deposits when investors deposit it in their brokerage accounts instead of investing in other sectors. In this case, however, it can be considered standby funds for an additional investment.
An official from the KOFIA said, “When investors keep funds from selling stocks and repurchasing funds in their brokerage accounts, investor deposits grow all at once. However, the growth trend means more funds targeting to enter and re-enter the stock market. Considering the fact that standby funds reached a record high, the stock market will have a limited drop even when it experiences adjustment.”