Idle money in S. Korea surpasses W1,200tr mark

The volume of short-term floating capital in South Korea surpassed the 1,200 trillion won ($900 billion) mark, as the government seeks to funnel the liquidity into a 20 trillion fund tied to the Korean New Deal package, data showed Sunday.

The amount of cash and other short-term capital totaled 1,273.6 trillion won as of end-June, data compiled by the Bank of Korea and the Korea Financial Investment Association showed.

By asset, the M1 money supply, which is essentially cash, came to 1058.1 trillion won, while money market accounts reached 135 trillion won. Money held in brokerages came to 46.2 trillion won.

The total volume has been gaining a monthly average of some 42 trillion won since March, when the figure came to 1,148 trillion won. It used to gain around 20 trillion won monthly, previously, prompting concerns from onlookers over the flow of excess liquidity into either the heated housing or stock markets.

The increase in the volume of idle money here followed the central bank’s decision to slash its benchmark interest rate to the record-low of 0.5 percent, to provide cushion for the market hit by the coronavirus pandemic.

But this in turn dragged down yields on fixed deposits offered by commercial lenders. Such low-risk investments offered by commercial banks have been a popular option here for decades, but the Bank of Korea’s latest move pushed most of the lenders’ yields on 1-year fixed deposits under 1 percent-mark.

Despite government efforts to cool down the real estate market with a series of tough measures, apartment prices in Seoul have yet to display solid signs of stabilization. The market price of large-sized apartments in Seoul surpassed the 2 billion won mark in August, according to the monthly housing price trend report released last month by KB Kookmin Bank.

The nation’s benchmark Kospi has been on a bullish run for some time, driven by tech companies and initial public offerings of major firms here, including gaming firm Kakao Games.

President Moon Jae-in asked government officials on Thursday to help funnel the nation’s floating capital into the 20 trillion won “New Deal Fund,” which aims to attract private and retail investors to fund projects under the economic package. Tax benefits would be offered to the those who decide to invest in certain projects.

By Jung Min-kyung (mkjung@heraldcorp.com)