No Stock Market Santa This Year... Retail Investors Packing Up

[Asia Economy Reporter Kwon Jaehee] Due to global interest rate hikes and economic slowdown, this year's 'Santa Rally' is unlikely to be expected, leading to an increase in individual investors leaving the market. The 'Santa Rally' typically refers to a brief rise in stock prices from after Christmas to early the following year, but amid the stock market chill, investor deposit funds have hit their lowest level in 2 years and 4 months.

According to the Korea Financial Investment Association on the 13th, as of December 8, investor deposit funds were recorded at 46.6786 trillion won. Compared to the end of last year, this is about a 30% decrease, and in October, even the 50 trillion won mark was broken. This is the lowest level in 2 years and 4 months since July 2020 (47.7863 trillion won).

Investor deposit funds refer to the money that individual investors leave with securities firms for stock investment or the funds remaining in accounts after selling stocks, serving as standby funds in the stock market. A decrease in investor deposit funds indicates a decline in interest in the stock market and is commonly used as an indicator showing the enthusiasm for stock investment.

Along with investor deposit funds, the balance of securities firms' Comprehensive Asset Management Accounts (CMA), classified as representative standby funds in the stock market, also decreased. According to the Korea Financial Investment Association, as of December 8, the CMA balance was 59.5974 trillion won, down 8.59% compared to the end of last year. Compared to the end of the previous month (November), it also decreased by about 3%. As of January 3 this year, the CMA account balance was about 69.1867 trillion won, meaning it has decreased by about 10 trillion won in about a year.

The freezing of investors' sentiment is mainly due to high interest rates. Ahead of the last Federal Open Market Committee (FOMC) meeting of the year on the 14th, the market widely expects a 50 basis point increase in the benchmark interest rate. As a result, the money withdrawn from the stock market is being absorbed by banks in a phenomenon called 'reverse money move,' where the profitability of leaving funds in deposits and savings due to the interest rate hike is judged to be better than the investment returns from stocks.

The so-called 'debt investment' scale, where individual investors borrow money to invest during a rising market, has also decreased. The credit transaction loan balance, which can gauge the scale of debt investment, has decreased by about 25% compared to the end of last year. However, as of December 8, the debt investment scale was in the 17 trillion won range, slightly up from the 16 trillion won range in October.

Kang Dongjin, a researcher at Hyundai Motor Securities, analyzed, "In the past, the probability of a year-end rally during the Federal Reserve's tightening period was relatively low," adding, "Although recent Fed officials' remarks about slowing the pace of tightening have eased market concerns, the ongoing interest rate hikes are likely to remain a burden."