The average balance of broad currency (M2) in May was 4,184.4 trillion won, up 32.2 trillion won (0.8%) from the previous month, the Bank of Korea said on the 15th. It was the third straight monthly increase and the highest growth rate since February 2023. Funds earned by semiconductor corporations flowed into financial products.
M2 refers to the money supply. It is the sum of narrow currency (M1) such as passbook savings deposits that allow free withdrawals and deposits like payroll accounts and demand deposits, plus comprehensive asset management accounts (CMA), money market funds (MMF), and time savings and installments of less than two years.
According to the "May currency and liquidity" released by the Bank of Korea that day, nonfinancial corporations were tallied at 30.1 trillion won, and other financial institutions at 11.8 trillion won. In contrast, the household and nonprofit sector fell by 19 trillion won. As the Korea Composite Stock Price Index (KOSPI) surged recently, more people appeared to withdraw money from deposits and invest in stocks.
By product, passbook savings deposits increased by 24.3 trillion won, and money trusts of less than two years rose by 3.8 trillion won.
The Bank of Korea said, "Passbook savings deposits increased as corporations' short-term surplus funds and some other financial institutions expanded the management of funds related to the securities and derivatives markets," and added, "Money trusts of less than two years turned to an increase due to inflows of deposited funds from semiconductor corporations."
Meanwhile, the old M2 was 4,789 trillion won, up 101 trillion won (2.1%) from the previous month (4,688 trillion won). Compared with the same month a year earlier, it was 11.7%, the highest since February 2022 (11.8%). The old M2 is the money supply that includes revenue securities such as exchange-traded funds (ETF). It reflects an increase in stock investment funds. Since November last year, the Bank of Korea has been publishing a new M2 that excludes revenue securities.