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Stock-related floating money rises steadily amid uncertainty

May 26, 2017 - 09:13 By a2016032
Money floating around the South Korean stock market has grown steadily this year as investors park funds in short-term equity-related vehicles amid financial uncertainty and a recent market rally, data showed Friday.

The amount of money sitting idle around the local equity market came to 298 trillion won ($266 billion) as of Thursday, up 12.4 percent from the end of 2016, according to the data by the Korea Financial Investment Association.

The figure includes 23.6 trillion won in investor deposits and 71.2 trillion won in repurchase agreement balances. In particular, deposits at money market funds reached 135.7 trillion won, up a whopping 30 percent from the end of last year.

The association said investors had been drawn to stock-related short-term investment vehicles amid the local financial market uncertainty triggered by a massive corruption scandal involving former President Park Geun-hye, the US presidential election and South Korea's May 9 snap presidential poll.

Another driver is the recent bull run of the South Korean stock market that has prompted investors to rush to load up on stocks, it added.

The benchmark Korea Composite Stock Price Index rose 0.53 percent to a new high of 2,355.30 on Friday, renewing record highs for the fourth consecutive session.

The steady increase in stock-related floating funds is stoking expectations that the current earnings-driven market rally could shift into a liquidity-driven one.

The local stock market's recent bull run has been powered by better-than-expected first-quarter earnings by top-cap Samsung Electronics Co. and other large caps. Investors are also upbeat about their earnings for the second quarter amid rising exports and recovering domestic demand.

Some analysts expected more investors to flock to the stock market should it continue its current upward momentum down the road.

Meanwhile, total floating capital in South Korea, including short-term deposits at banks and nonbank financial institutions, has already exceeded the 1,000 trillion-won mark, with the amount reaching 1,010 trillion won as of end-2016. (Yonhap)