SEOUL, June 18 (AJP) -Cash set aside for stock investments has surged and money parked in instantly accessible accounts remains elevated, underscoring the depth of fear of missing out in a stock market whose benchmark index has more than doubled since the beginning of the year.
Households and companies are moving cash in and out of bank accounts at the fastest pace in a decade, favoring flexible, short-term deposits over long-term savings as a record-breaking stock market rally reshapes how Koreans manage their money.
According to the Bank of Korea on Wednesday, the turnover ratio of demand deposits — a measure of how frequently money flows in and out of checking accounts and other instantly accessible deposits — stood at 23.1 in April, up from 18.2 a year earlier and 14.7 in April 2022, shortly after the COVID-19 pandemic.
The ratio reached 23.6 in December, its highest level in 10 years, and has remained above 23 for two consecutive months since March.
The indicator is calculated by dividing total withdrawals by the average amount of deposits held. A higher reading suggests households and businesses are actively deploying cash for spending and investment rather than leaving it in long-term savings accounts.
The trend reflects a broader shift in how Koreans manage money, prioritizing liquidity over locking funds away for months or years.
The country's five largest banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — held a combined 703.2 trillion won ($510 billion) in demand deposits as of June 16, up 29.2 trillion won from the end of last year.
At the same time, money earmarked for stock investments jumped 41.8 percent to 36.7 trillion won, highlighting investors' growing preference to keep cash readily deployable as opportunities emerge.
Retail investors are also taking on more leverage. Credit extended through overdraft accounts at the five major banks reached 43.2 trillion won at the end of May, up about 3.5 trillion won this year.
Corporate cash is moving in a similar fashion. Demand deposits held by businesses at the five major banks rose by more than 13 trillion won to 247.6 trillion won at the end of May from 234 trillion won at the end of last year.
Much of the increase flowed into money market deposit accounts, or MMDAs, which allow companies to earn interest while preserving immediate access to cash.
The preference reflects rising interest rates and increasingly unpredictable funding needs. Companies face larger expenses from performance bonuses, shareholder returns and financing costs, prompting them to keep excess cash flexible rather than tie it up in longer-term products.
Samsung Electronics and SK hynix are among companies reported to have parked portions of their surplus cash in MMDAs to maximize interest income.
Financial institutions expect money to circulate even faster as interest rates rise.
The yield on one-year bank bonds, a benchmark used to price deposit rates, climbed to 3.565 percent on June 16, up 0.748 percentage point from the start of the year.
Concerns about inflation stemming from Middle East tensions, coupled with expectations that the Bank of Korea could raise rates further, have pushed market yields higher and encouraged banks to increase deposit rates.
Several lenders now offer returns approaching those of savings banks. Standard Chartered Korea offers deposits paying up to 3.75 percent annually, while regional lenders including Jeonbuk Bank and Jeju Bank offer rates around 3.7 percent. Internet-only banks such as KakaoBank, K Bank and Toss Bank offer around 3 percent even on three-month deposits.
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