According to the Bank of Korea’s January financial market report, bank deposits shrank by 50.8 trillion won ($35 billion) last month, reversing a 7.7 trillion won increase in December. Demand deposits alone dropped 49.7 trillion won, compared with a 39.3 trillion won gain a month earlier.
In contrast, asset management firms recorded a strong inflow of 91.9 trillion won, swinging from a 3.9 trillion won outflow in December.
MMFs, which allow fast withdrawals, attracted 33.0 trillion won, reversing a 19.7 trillion won outflow the previous month. Stock-type funds saw inflows surge to 37.0 trillion won from 10.0 trillion won in December, while bond-type funds returned to net inflows with a 4.2 trillion won increase after a 6.8 trillion won outflow.
Market participants said MMFs are increasingly being used as temporary “parking lots” for stock-bound cash, as investors wait for favorable entry points in a fast-moving market.
The shift away from deposits and bonds coincided with a sharp rise in market yields, reflecting falling bond prices. The three-year government bond yield climbed from 2.95 percent at end-December to 3.22 percent as of Feb. 10, up 27 basis points, while the 10-year yield rose 29 basis points from 3.39 percent to 3.68 percent.
The stock market has been on a near nonstop record-setting rally since yearend. The benchmark KOSPI has gained 27 percent from end-December, while the KOSDAQ is up 21 percent.
Investor funds held at securities firms rose by 18.2 trillion won in January, following a 9.9 trillion won increase in December, reinforcing signs of expanding retail participation in the rally.
The central bank said government bond yields rose sharply amid shifting monetary policy expectations and concerns over fiscal expansion, compounded by the migration of funds into equities.
Meanwhile, bank household loans fell by 1 trillion won in January, following a 2 trillion won decline in December.
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