The KOSPI's rally into the unprecedented 7,000 range is triggering a major shift in where Korean investors park their money, with funds flowing out of bank deposits and cryptocurrencies into the stock market.
According to the Bank of Korea's Economic Statistics System and the Korea Financial Investment Association on Friday, bank deposits and cryptocurrency holdings have declined while stock market sidelined cash has grown rapidly amid the recent domestic equity boom.
Bank of Korea data showed that the balance of time deposits between 100 million won and 500 million won at domestic banks stood at 140.61 trillion won ($103 billion) at the end of last year. The figure had climbed to 149.50 trillion won at the end of the first half of last year, but fell by approximately 8.9 trillion won in just six months.
The number of accounts also declined. Time deposit accounts in the 100 million to 500 million won range fell from 694,000 at the end of the first half of last year to 662,000 by year-end.
The decline in smaller deposits was even more pronounced. Time deposit balances under 100 million won fell from 308.33 trillion won in the first half of last year to 299.71 trillion won at year-end, a drop of approximately 8.6 trillion won. The number of accounts declined to 21.63 million, the lowest level since 2019.
The cryptocurrency market shows a similar trend. According to data the Bank of Korea submitted to Rebuilding Korea Party lawmaker Cha Gyu-geun on Thursday, domestic crypto asset holdings totaled 60.6 trillion won as of the end of February this year. The figure had swelled to approximately 121.8 trillion won at the end of last year before halving within two months.
Trading volume also fell sharply. Average daily trading value surged to 17.1 trillion won in December last year but declined to around 4.5 trillion won by the end of February this year. Won-denominated deposits in crypto accounts also fell from 10.7 trillion won to 7.8 trillion won over the same period.
Experts attribute the shift to both the recent KOSPI surge and weakness in cryptocurrency prices. "Investment funds moved due to the stock market boom, and the impact of falling cryptocurrency prices was also significant," said Hong Sung-wook, an analyst at NH Investment & Securities.
Investor deposits have surged accordingly. According to the Korea Financial Investment Association, investor deposits rose from 87.83 trillion won at the end of last year to 124.76 trillion won at the end of last month — an increase of approximately 36.93 trillion won in just four months.
However, some in the banking sector note that the money movement is not entirely one-directional.
According to financial industry sources on Wednesday, the average loan-to-deposit ratio at Korea's five major banks — KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup — stood at 96.0% at the end of the first quarter this year. That marks the lowest level since the first quarter of last year.
A lower loan-to-deposit ratio indicates that deposit growth outpaced loan growth. Won-denominated deposits at the five major banks rose from 1,668 trillion won at the end of the first quarter last year to 1,765 trillion won at the end of the first quarter this year, an increase of approximately 97 trillion won. Loans, by contrast, grew by only about 67 trillion won over the same period.
"There were concerns about fund outflows due to the stock market boom, but preference for safe assets has also grown amid instability in the Middle East," a commercial bank official said. "We are seeing some of the funds that had moved to the stock market flow back into deposits."
Another banking industry official said, "Inflows from semiconductor-related corporate funds and institutional deposits are also continuing. Despite the stock market's rise, the deposit base is not being dramatically shaken."
