Funds Poured into Standby Money... Broad Money Supply Sees Largest Increase in 7 Months

'October Currency and Liquidity'
Impact of Weak Q3 Corporate Earnings and Export Economy Uncertainty
Increase in Idle Funds Amid Stock and Bond Market Uncertainty

In the third quarter, due to the poor performance of major companies and growing concerns about the export economy, idle investment funds increased, leading to the largest increase in the money supply in seven months.

Yonhap News

According to the 'October Money and Liquidity' data released by the Bank of Korea on the 16th, the average balance of broad money (M2, seasonally adjusted) in October reached 4,110.4 trillion won, up 39.7 trillion won (1.0%) from the previous month. This marks the largest increase in seven months since March (1.7%).

M2 has been increasing for 17 consecutive months since June last year.

M2 is a broad monetary indicator that includes narrow money (M1) such as cash, demand deposits, and savings deposits with check-writing privileges, as well as money market funds (MMF), time deposits under two years, beneficiary certificates, and repurchase agreements (RP).

By product, beneficiary certificates (9.3 trillion won), MMF (7.2 trillion won), time deposits (5.9 trillion won), and money trusts (5.2 trillion won) increased compared to the previous month, while other monetary products (-0.9 trillion won) decreased.

The Bank of Korea explained that time deposits continued to increase as banks proactively sought deposits ahead of large-scale time deposit maturities. MMF and money trusts increased as corporate funds that had been withdrawn for quarter-end financial ratio management were re-injected, along with the inflow of idle investment funds. Financial bonds under two years turned to an increase due to a rise in issuance, mainly short-term bank bonds.

Other monetary products decreased as foreign currency deposits increased due to export transaction inflows, but CMA profitability declined.

A Bank of Korea official explained, "With the poor performance of major companies announced at the end of September and the outlook of uncertainty in the export economy, uncertainty in the stock and bond markets increased, leading to a rise in money supply centered on idle investment funds."

By economic agent, households and nonprofit organizations (5.7 trillion won), corporations (7.3 trillion won), and other financial institutions (21.7 trillion won) increased, while other sectors (-1.8 trillion won) decreased.

The average balance of narrow money (M1, seasonally adjusted) in October was 1,233.5 trillion won, up 0.7% from the previous month, mainly due to savings deposits with check-writing privileges.