An Era Where You Can Earn Interest Just by Waiting Instead of Buying Stocks

Amid higher interest rates and frequent stock price swings, investors are moving their money from the stock market into cash-like assets such as deposits, foreign currency deposits, and money market funds (MMFs, funds that invest in short-term financial products). Following the Bank of Korea's interest rate hikes, bank fixed deposit rates have risen to the mid-3 percent range, and this month the fixed deposit balance at the five major banks surpassed 1,000 trillion won for the first time.

Money is also flowing into foreign currency deposits, buoyed by currency gains and rising interest rates. As of November 14, dollar deposits at the four major banks stood at 70.4 billion dollars, while yen deposits totaled 1.0709 trillion yen. Compared to the end of June, before the domestic market entered a correction phase, these figures surged by 12.2 billion dollars and 206.4 billion yen, respectively.

Money surrounding the stock market moved in the opposite direction. Investor deposits fell by 14 trillion won from June to 107 trillion won. Margin loan balances—so-called 'debt investment' balances—also declined by 5 trillion won over the same period to 32 trillion won.

The money that left went into MMFs, which generate interest income by investing in short-term bonds and other instruments. As of last month, MMF balances stood at 257 trillion won, up 5.6 trillion won from the previous month. This is interpreted as reflecting expectations that investors can secure annual returns in the 2 percent range even while waiting to enter the stock market.

Kang Jin-hyuk, a researcher at Shinhan Investment Corp., explained, "The high interest rate environment has dampened investors' appetite for risky assets like stocks, while strengthening the tendency to seek refuge in deposits and other vehicles whose expected returns have risen."