[New Money Move] ① Early Movers Among Asset Owners Shift Direction Toward Risk Assets

Significant Increase in Stock Inquiries at Securities Firm PB Centers
Decrease in Savings Deposits, Increase in Investor Deposits

[Asia Economy Reporter Park So-yeon] Although concerns about an economic recession are growing at the onset of a downturn, inquiries from clients seeking new investment opportunities continue unabated at major banks and securities firms' PB centers. As macroeconomic uncertainties such as the easing of the strong dollar and reduced interest rate volatility have somewhat subsided, dormant funds are moving to find investment destinations. Since the beginning of this year, the scale of bank deposits and savings has decreased, while securities firms' investor deposits have steadily increased. Although the COVID-19 pandemic and recession concerns remain ongoing, the movement of money chasing profits is unstoppable.

According to the financial investment industry, inquiries about individual stocks have recently surged at securities firms' PB centers. Oh In-ah, Executive Director of NH Investment & Securities Premier Blue Gangbuk Center, said, "Customers are asking again, 'How about this stock?'" and added, "You can definitely feel the atmosphere changing, and investment sentiment is reviving."

Compared to the beginning of the year, the KOSPI has risen 10% (based on the closing price on February 1), and the KOSDAQ has increased by 11.8%. As the KRW-USD exchange rate stabilized, foreigners have net purchased stocks worth approximately 6.5495 trillion KRW over the past month.

Investor deposits and on-exchange derivatives trading deposits at securities firms have steadily increased since the Lunar New Year holiday. According to the Korea Financial Investment Association's comprehensive statistics service, investor deposits have gradually grown since the holiday. They rose from 44.1599 trillion KRW on January 20 to 49.275 trillion KRW on January 31, an increase of about 5 trillion KRW (11.6%). During the same period, on-exchange derivatives trading deposits increased by 283.8 billion KRW (2.3%), from 12.1966 trillion KRW to 12.4804 trillion KRW.

In contrast, the balance of fixed deposits at major commercial banks such as KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Bank stood at 814.508 trillion KRW as of January 27, down 3.9286 trillion KRW from the end of the previous month. Nearly 4 trillion KRW flowed out within a month. Until November last year, the preference for safe assets led to a record increase in deposits and savings, with the amount of money circulated in a month rising by 27 trillion KRW compared to the previous month.

Although interest rates remain high, deposit rates are unsatisfactory to asset owners due to regulatory pressure. While money flowed into high-interest bonds in January following the second half of last year, many quick-moving asset owners who have already realized gains are seeking new investment destinations. Executive Director Oh said, "We recommend long-term investment in bonds, but long-term bonds purchased in the fourth quarter of last year are currently yielding returns in the 16% range, so we are advising clients to sell."

According to a simulation by NH Investment & Securities, if Korean government bonds with 20-year and 30-year maturities were purchased in November last year, the investment returns based on market valuation before maturity as of the end of January this year were 13.22% and 15.90%, respectively.

As the investment environment changes so rapidly that it is difficult to predict even a short distance ahead, the risk of mistiming can cause discord, which further stimulates investors' sentiment. Investors who expected interest rates to rise further in the fourth quarter of last year and took short positions suffered losses.

Yeodaeyoung, PB Team Leader at Woori Bank TCE Signature Center, said, "Those who set short maturities when deposit rates were good at the end of last year and planned to switch to long-term around March this year have recently been visibly unsettled as market interest rates began to fall preemptively from December." He added, "Especially domestically, the market interest rates reacted strongly due to the government's market stabilization funds released after the Legoland incident and the decline in U.S. Treasury yields."

Asset owners who earned profits from deposits and bond investments are turning their attention to the stock market. In January, foreign buying was so strong that individual investors recorded net sales. However, they are seizing investment opportunities during corrections, such as absorbing foreign sales worth around 400 billion KRW in a single day on the 31st. Investment inquiries have also increased for small buildings and unlisted stocks, which had lost appeal in the high-interest-rate environment. Yoo Yong-seok, PB Team Leader at Hana Securities Club1 Hannam WM Center, explained, "Regarding bonds, securities firms' guaranteed bonds that once reached interest rates in the 10% range have now dropped to the 4% range. Asset owners who have experienced high interest rates are not satisfied with current rates and are looking for undervalued risk assets."

Institutional investors are also quickly changing their investment strategies. Han Jong-seok, Chief Investment Officer (CIO) of the Police Mutual Aid Association's financial investment division, said, "We expect higher expected returns in the stock sector this year," adding, "We are paying close attention to sectors such as renewable energy focused on energy, secondary batteries, and wind power, the defense industry due to increased geopolitical risks, and sectors related to China's reopening."

The end of China's zero-COVID policy leading to demand recovery and the sharp drop in European natural gas prices easing inflation concerns are also reasons investors are turning their interest toward risk assets. Recently, copper prices, reflecting expectations of real economic recovery, surged sharply since the end of last year, shifting to net buying dominance, and orders for machine tools in Japan, one of the traditional leading indicators of the global manufacturing cycle, are also rebounding.

Domestically, the bond market shock triggered by the Legoland incident has somewhat eased due to policy fund intervention, and investment sentiment is recovering thanks to the semiconductor tax credit rate increase bill and expectations for strengthened bank shareholder returns. Financial investment institutions, insurance companies, and investment trust institutions are joining the net buying trend. Kim Sang-mi, Asset Allocation Strategy Team Leader at Kiwoom Asset Management, said, "Although the U.S. Federal Reserve continues its 'inflation fighting' stance, the market is responding positively as uncertainties have decreased."