Funds Flowing Back to Banks Amid Stock Market Volatility

Funds are once again flowing back to banks as the possibility of interest rate hikes increases and stock market volatility expands. Analysts suggest that money, which had remained in the stock market during a bullish phase in hopes of high returns, is now moving to relatively safer bank deposits due to fatigue from rapid stock price fluctuations.

As of July 6, the balance of time deposits at the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—stood at 961.47 trillion won, an increase of 12.7 trillion won from 949.4 trillion won at the end of last month.

Previously, the influx of funds into the stock market had slowed the growth of bank deposits. The phenomenon of 'money move' saw capital concentrating in the stock market, leading to a stagnation in bank deposit growth.

However, the trend has shifted since April. The balance of time deposits at the five major banks was 937.18 trillion won at the end of April, indicating an increase of over 24 trillion won in just over two months.

Market observers note that as stock market volatility has increased, some investors are realizing profits and returning their funds to banks. The rising expectations for interest rate hikes have also led to an increase in market interest rates, which in turn has prompted higher rates for deposit products, stimulating this 'reverse money move' back to banks.

A representative from a commercial bank stated, "Since last year, there has been a significant increase in funds leaving banks due to the stock market boom, but recently, individual investors feeling fatigued from stock market volatility are returning to banks."

Some analysts suggest that if the Bank of Korea resumes its trend of raising interest rates, the movement of funds toward banks could accelerate. As market interest rates rise, banks' funding costs increase, providing greater incentive to adjust deposit rates. Currently, there is a prevailing expectation in the market that the Bank of Korea will raise the benchmark interest rate twice within this year.

However, some experts caution against viewing the recent increase in time deposits as a complete 'reverse money move.' The growth in household loans continues, and demand deposits, which are waiting for investment opportunities, still exceed 700 trillion won. This indicates that there is still a significant amount of capital that could shift back to riskier assets if the stock market stabilizes or new investment opportunities arise. As of the end of last month, the balance of household loans at the five major banks was 774.96 trillion won, an increase of 4.14 trillion won from the previous month.

A financial industry representative remarked, "As stock market volatility expands and the interest rate hike phase becomes more pronounced, the demand for liquidity is increasing. For the time being, it seems that market funds will continue to flow between bank deposits and risk assets."