As the stock market has swung sharply up and down in the wake of the Iran war, money from investors unable to set a direction is flocking to short-term financial products such as money market funds (MMFs) and cash management accounts (CMAs). Even gold prices, considered a safe asset, are whipsawing, spreading a "parking strategy" of tying up funds for the time being.
While more money is temporarily taking shelter from the stock market, the fervor for borrowing to invest in stocks has not cooled. As of on the 26th, margin debt stood at 32.7524 trillion won, similar to the level on on the 27th of last month (32.6690 trillion won) before the war.
◇ 244 trillion won in lump-sum money into MMFs… inflows also into MMF ETFs
According to the Korea Financial Investment Association on the 28th, the total principal paid into domestic MMFs as of on the 26th is 244.3567 trillion won. Compared with on the 27th of last month (231.9704 trillion won) before the outbreak of the war, it increased by nearly 13 trillion won in just over a month.
MMFs are ultra-short-term financial products that invest in short-term Government Bonds, commercial paper (CP), and certificates of deposit (CD). They allow free deposits and withdrawals and accrue interest daily, serving as "short-term parking accounts." With low risk of principal loss, they are commonly chosen by investors for temporary cash storage when market volatility rises.
This trend is also evident in the exchange-traded fund (ETF) market. MMF ETFs invest in ultra-short-term financial products based on MMF management methods, but unlike MMFs, they can be traded in real time, offering higher liquidity.
According to the Koscom ETF Check, over the past week (Mar. 20–26), "KODEX Money Market Active" (413.5 billion won) ranked No. 2 in overall ETF inflows. On the 24th, KODEX Money Market Active also took the top spot for daily inflows as 266.8 billion won flowed in.
As volatility in the stock market increased, with the KOSPI recording a record decline of 12.06% this month, investors are quickly moving funds to "havens." Baek Gwan-yeol of LS Securities said, "It appears to be a short-term risk-avoidance move in response to uncertainty stemming from Iran."
The weakness in "gold prices," once considered a traditional safe asset, also seems to have affected fund flows. Typically, gold prices rise when geopolitical risk increases, but recently the stronger dollar and weaker expectations for rate cuts have combined to keep gold from serving as an alternative investment destination.
Park Mun-hyeon, a KB Securities researcher, said, "As fund movements lost momentum, MMF subscriptions increased for short-term parking, and the balance is rising steeply," adding, "Because March is the end of the first quarter, month-end outflows may be larger than in January and February, but the absolute size of funds is high, so it will exceed 210 trillion won even at the end of the quarter."
◇ Securities firm CMAs also popular… higher rates than banks' flexible high-yield savings accounts
Another short-term financial product, CMAs, is also popular. A CMA is an account in which a securities firm invests customer funds in short-term financial products and returns the revenue generated. Like MMFs, it is a representative short-term cash management tool. CMA balances first surpassed 100 trillion won on Dec. 23 last year and have stayed in the 100 trillion won range. On the 16th of this month, they climbed to 112.0716 trillion won, a record high.
Currently, securities firm CMA rates are around 1%–2% per year, higher than the base rates of around 0.1% for banks' flexible high-yield savings accounts. Among CMAs currently on sale, the product with the highest yield is Mirae Asset Securities' "CMA–repurchase agreement (RP) Naver Account" at 2.50% per year (for deposits of 10 million won or less). The yields of Daol Investment & Securities' CMA (RP type) and Woori Investment & Securities' "RP-type CMA (RP type)" are 2.40% and 2.30% per year, respectively.
An industry official explained, "Bank interest cannot deviate much from the short-term policy rate set by the Central Bank, but CMAs can offer higher rates because securities firms pay interest from revenue earned through their own bond investments and other activities."