A change is being detected in the flow of household funds that had been pouring into the stock market. In Aug., household time deposits returned to growth, and loans related to stock investing slowed, leading to analysis that the pace of household funds flowing into the market will moderate.
KB Securities analyzed this in its report on the 10th, "Korea: visualization of changes in household fund flows."
According to the report, bank time deposits in Aug. increased by 2 trillion 30 billion won, continuing a sharp rise following July. However, it is difficult to interpret the deposit increase through the first half of this year as households' "preference for safe assets."
Detailed statistics through June show that the sector driving the increase in deposits was the corporate sector, which had financial room thanks to a large trade surplus and strong exports. In contrast, household time deposits have decreased by an unprecedented margin this year, with a massive shift into investment assets such as stocks and funds.
This MoneyMove trend has shown signs of change starting in Aug. In July–Aug., as corporate funds were withdrawn for tax payments and other reasons, transferable deposits decreased, while household time deposits finally turned to an uptrend.
The change in household funds is also clear in the loan market. The increase in bank household loans in Aug. shrank to 3 trillion 400 billion won from 5 trillion 500 billion won in July. While the rise in mortgage loans expanded from 3 trillion 500 billion won to 4 trillion won, other loans, including unsecured loans, turned from a 2 trillion won increase to a 600 billion won decrease. The Bank of Korea also cited the slowdown in individuals' stock investing and tighter management of unsecured loans by banks as key reasons for the decline in other loans.
KB Securities projected that, as the effect of consecutive rate hikes by the Bank of Korea is reflected, inflows into the stock market through household borrowing or deposit withdrawals will slow further. In an environment where borrowing costs (lending rate) and deposit yields rise simultaneously, households have little choice but to be much more cautious about putting additional funds into the stock market.
Researcher Ryu Jin-i at KB Securities said, "Because the perception that high borrowing costs will persist is more important than temporary rate fluctuations for household borrowing behavior, the start of base rate hikes will act as a factor constraining the expansion of other loans," adding, "For now, the likelihood of a large outflow of existing investment funds is low, but new inflows via deposit withdrawals and leverage (borrowing) will gradually moderate."