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Idle money in S. Korea hits record high

All News 10:57 July 18, 2016

SEOUL, July 18 (Yonhap) -- The volume of short-term "floating" capital in South Korea hit an all-time high of more than 950 trillion won (US$835 billion) amid record-low interest rates and increased uncertainties, data showed Monday.

According to the Bank of Korea and the Korea Financial Investment Association, cash and other short-term capital totaled 958.9 trillion won as of end-May, up 15.1 trillion won from a month earlier. It stood at 866.3 trillion won in May last year.

It marks the first time that such floating capital has surpassed the 950 trillion won here.

By asset type, cash came to 80.1 trillion won and demand deposit reached 188.5 trillion won.

The remainder included 454.3 trillion won in money-market deposits, 69.9 trillion won in money-market funds (MMFs), 20.2 trillion won in certificates of deposit (CDs), 44.3 trillion won in cash management accounts (CMAs) and 10.2 trillion won in repurchase agreements (RPs),

The increase shows that investors remain reluctant to put their money into long-term assets due to low interest rates and increased economic uncertainties.

It poses a dilemma for the nation's financial authorities struggling to help boost the economy.

In June, the central bank cut its key rate to a record low of 1.25 percent in order to add liquidity into the market.

But investors have opted to park their money in short-term investment vehicles, due to a lack of attractive financial products.

Short-term floating capital in South Korea has been on a steady rise from 539.3 trillion won at the end of 2008, 646.9 trillion won in 2009, 712.9 trillion won in 2013 and 794.8 trillion won in 2014.

"Amid the trend of low interest rates and growth, a lopsided pursuit of short-term high yields is bound to raise risks," Lee Jie-eon, a senior researcher at the Korea Institute of Finance, said. "On the other hand, stock and bond markets, which require long-term investment, and corporate financing suffer troubles."


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