Market Money Supply Increases by 12.7 Trillion Won... "Recovery in Stock and Bond Investment Demand"

On the morning of January 16, Bank of Korea officials loaded funds released ahead of the Lunar New Year holiday onto an armored vehicle at the Bank of Korea Gangnam Headquarters in Gangnam-gu, Seoul. [Image source=Yonhap News]

As demand for stock and bond investments recovered, the money supply increased by nearly 13 trillion won in February.

According to the 'Money and Liquidity' statistics released by the Bank of Korea on the 14th, the average broad money supply (M2 basis) in February was 3,819.5 trillion won, up 12.7 trillion won (0.2%) from the previous month.

In January, the money supply decreased due to a large outflow of funds from demand deposit savings accounts, but it turned upward again after one month.

The broad money supply indicator M2 includes cash, demand deposits, and checking deposits (all M1), as well as money market funds (MMF), time deposits under two years, installment savings, beneficiary certificates, certificates of deposit (CD), repurchase agreements (RP), financial bonds under two years, and money trusts under two years?short-term financial products that can be quickly converted into cash.

By product, beneficiary certificates increased by 11.1 trillion won due to the recovery in demand for stock and bond investments. This is the largest increase since November 2007 (13.1 trillion won).

MMFs increased by 6.7 trillion won, while demand deposit savings (-8.6 trillion won) and demand deposits (-4.1 trillion won) decreased.

Time deposits and installment savings increased by 6.8 trillion won. As deposit interest rates fell, the increase was significantly smaller than the previous month (24.8 trillion won).

By economic agents, households and non-profit organizations increased time deposits and installment savings at non-bank deposit-taking institutions by 17.1 trillion won. Other financial institutions also increased by 3.8 trillion won, mainly in MMFs and beneficiary certificates.

On the other hand, companies decreased by 5.2 trillion won, mainly in demand deposit savings and time deposits and installment savings.

The narrow money supply M1, which includes only cash, demand deposits, and checking deposits, was 1,197.4 trillion won in February, down 7 trillion won from the previous month. This marks the ninth consecutive month of decline since June last year.