KOSPI surge pulls 35T won from big banks as stock cash rises

Jan. 20 (Asia Today) — Bank deposits in South Korea are falling sharply as investors shift cash toward the stock market during the KOSPI’s rally, raising concerns in the financial sector about an accelerating “money move,” industry data showed Tuesday.

Demand deposits at the five major banks – KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH Nonghyup Bank – totaled 673.9145 trillion won ($455.6 billion), down 4.99% from the end of last month, a decline of 35.3973 trillion won ($23.9 billion), the financial sector said.

Time deposits also edged lower, slipping to 938.2555 trillion won ($634.3 billion) from 939.2863 trillion won ($635.0 billion) in December.

Market participants attributed the outflows to a shift into securities-related cash, including investor deposits – standby funds used directly for stock purchases – and cash management accounts.

Investor deposits rose to 91.2182 trillion won ($61.7 billion) as of Friday from 77.912 trillion won ($52.7 billion) at the end of November, the data showed. Cash management account balances climbed to 102.9779 trillion won ($69.6 billion) from 98.0722 trillion won ($66.3 billion) over the same period.

The increase in investor deposits has tracked the KOSPI’s gains, the report said. Investor deposits hovered near 60 trillion won ($40.6 billion) in June last year when the index was around 2,000, then topped 80 trillion won ($54.1 billion) on Oct. 13. As the KOSPI resumed a steady rise in January and touched 5,000, investor deposits moved above 90 trillion won ($60.8 billion), reaching 92.8537 trillion won ($62.8 billion) on Jan. 8.

Banks revived deposit products paying interest in the 3% range in the second half of last year, but they are facing competition from alternatives such as integrated investment accounts known as IMAs, introduced in December, the report said.

The IMA products are marketed as offering principal protection if funds are held to maturity while targeting returns above 4%, the report said. About 220 billion won ($149 million) flowed into one product on its first day, it added.

A banking industry official said the reappearance of 3% deposit products reflects an attempt to respond to the money move. The official said the decline in time deposits remains modest, but banks are monitoring the trend closely.

— Reported by Asia Today; translated by UPI

© Asia Today. Unauthorized reproduction or redistribution prohibited.