SEOUL, Sept. 15 (AJP) — South Korea's annual M2 growth slowed for the first time this year in July as readily accessible savings deposits fell while term deposits and money trusts increased as interest rates went higher.
M2, a broad measure of money supply, rose 5.8 percent from a year earlier, easing from 6.0 percent in June, according to data released Tuesday by the Bank of Korea (BOK).
On a seasonally adjusted monthly basis, M2 rose 0.3 percent to 4,225.6 trillion won, slowing from a 0.7 percent increase in June.
The slowdown came in the month when the BOK raised its base rate by 25 basis points to 2.75 percent, its first increase of the current tightening cycle.
The BOK said term deposits and money trusts with maturities of less than two years led the monthly increase.
Term deposits with maturities of less than two years increased by 27.3 trillion won in July, up sharply from a 7.1 trillion won increase in June, as corporate surplus funds and money related to the derivatives market flowed in.
Money trusts with maturities of less than two years increased by 11.4 trillion won, compared with a 6.3 trillion won increase in June, as semiconductor companies increased deposits.
Readily accessible savings deposits, meanwhile, shrank by 27.0 trillion won after edging up by 0.4 trillion won a month earlier.
M1, which mainly covers cash and deposits that can be used immediately, fell 2.2 percent from June after rising 0.4 percent the previous month.
Its annual growth rate slowed sharply to 6.4 percent from 10.0 percent.
Broader liquidity measures also declined.
Liquidity at financial institutions, or Lf, fell 0.4 percent from June after rising 1.0 percent, while broad liquidity, or L, declined 0.5 percent after increasing 0.8 percent a month earlier.
Their annual growth rates also eased, with Lf slowing to 7.5 percent from 8.5 percent and L to 8.0 percent from 9.4 percent.
M2 holdings by economic sector maintained the pattern seen in June, although the size of the moves narrowed.
Nonfinancial companies increased their M2 holdings by 20.6 trillion won, down from a revised 37.8 trillion won increase in June.
Households and nonprofit organizations reduced their holdings by 11.6 trillion won, compared with a 19.8 trillion won decline a month earlier.
M2 under the previous statistical definition also lost momentum, falling 0.8 percent from June as annual growth slowed to 10.3 percent from 12.2 percent.
Investment-fund holdings remained a major contributor, rising 48.9 percent from a year earlier and adding 5.0 percentage points to annual growth in the old-definition M2 measure.
AJP Takeaways
- South Korea's annual M2 growth slowed to 5.8 percent in July from 6.0 percent in June, marking the first slowdown this year.
- The slowdown came as the BOK raised its base rate by 25 basis points to 2.75 percent in July, while readily accessible savings deposits fell sharply.
- Nonfinancial companies continued to add M2 holdings while households and nonprofit organizations reduced theirs, although both moves were smaller than in June.
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