Money Supply Increases for Sixth Consecutive Month Amid Semiconductor Growth

The money supply has increased for the sixth consecutive month, driven by rising corporate deposits in the semiconductor sector and inflows of funds awaiting stock investments.

According to the Bank of Korea's "Monetary and Liquidity" statistics released on June 16, the average broad money supply (M2) for April was 4,153.9 trillion won, an increase of 25.3 trillion won (0.6%) from the previous month. This marks six months of continuous growth since November of last year.

The M2 measure includes cash, demand deposits, and checking accounts, as well as short-term financial products that can be quickly converted to cash, such as money market funds (MMFs), time deposits under two years, certificates of deposit (CDs), repurchase agreements (RPs), financial bonds under two years, and short-term trust funds.

Typically, an increase in M2 is interpreted as a rise in the amount of money circulating in the economy. In times of heightened market uncertainty, funds may remain in short-term financial products, contributing to an expansion of the money supply.

Including income securities in the previous M2 measure, the total reached 4,684.6 trillion won, reflecting a 1.3% increase from the previous month and a 10.3% increase from the same month last year. The year-over-year growth rate for income securities was 51.4%.

By category, deposits from semiconductor companies increased, with time deposits under two years shifting from a decrease of 14 trillion won to an increase of 13 trillion won. Other monetary products saw an increase of 8.3 trillion won, largely due to inflows of funds awaiting stock investments, particularly in comprehensive asset management accounts (CMAs).

By economic sector, non-financial corporations increased their deposits by 16.1 trillion won, households and non-profit organizations by 7 trillion won, and other sectors by 1 trillion won. In contrast, other financial institutions saw a decrease of 6 trillion won.

The narrow measure of money supply, M1, which includes only cash, demand deposits, and checking accounts, averaged 1,371.5 trillion won, up 0.4% from the previous month.

Liquidity in financial institutions (Lf) increased by 0.5% from the previous month to 6,219.3 trillion won. Broad liquidity (L) rose by 1.8% to 7,962.9 trillion won on a month-end basis.