Bank Run to Stock Market: What Happened After 4,000 PB?

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South Korean Banks See Trillions Won Exit as Stock Market Surges Past 4,000

Investor confidence in teh South Korean stock market is reaching unprecedented levels, triggering a massive shift of funds away from conventional bank deposits adn into equities. As of October 27th, a staggering 50.839 trillion won had been withdrawn from the country’s five largest commercial banks – KB kookmin, Shinhan, Hana, Woori, and NH Nonghyup – while investor deposits concurrently soared to a record high of 81.09 trillion won.

Did you know? – The KOSPI has risen nearly 50% since June 2nd, making it the fastest-growing major stock market globally.

Unprecedented Outflow from banks

The exodus from bank accounts represents the largest monthly withdrawal as July of last year,when 29 trillion won left the system in a single month. Demand deposits, easily accessible funds often held for investment purposes, fell to 618.8848 trillion won as of October 27th, a decrease of over 50 trillion won compared to the previous month’s 669.7238 trillion won. This trend accelerated around October 24th, coinciding with the KOSPI index breaking through the 3,900 level and fueling expectations of further gains. “The balance quickly decreased due to the move to conclude contracts in a hurry to avoid regulations due to the October 15 measures announced this month, and it seems a lot of funds have flowed out as the stock market has recently risen sharply,” stated a senior official.

Pro tip: – Demand deposits are easily accessible funds, making them a primary source for investment in the stock market.

Stock Market Fuels the ‘Money Move’

The funds leaving banks are demonstrably flowing into the stock market. investor deposits, the reserve funds used for stock market investments, surpassed 80 trillion won for the first time on October 13th and continued to climb, reaching 81.09 trillion won by October 27th. This surge is directly linked to the KOSPI’s historic performance.The index closed at 4042.83 on October 27th, exceeding the 4,000 mark for the first time, and remained high at 4010.41 on October 28th.

The KOSPI has experienced a remarkable 49.79% increase since June 2nd (2698.97), prior to the inauguration of the current administration, making it the fastest-growing major stock market globally. The KOSDAQ index has also seen notable gains, surpassing the 900 mark for the first time in a year and eight months.”At the beginning of this month,funds were flowing out on average less than KRW 1 trillion per day,but after KOSPI broke through the 3,900 mark,expectations for it to ‘break through the 4,000 mark’ grew,and as expectations grew,about KRW 2 trillion was flowed out on average per day,” noted another commercial bank official.

Reader question: – Why are banks raising interest rates? They are responding to dwindling low-cost deposits and increasing financing costs.

Banks respond with Increased Interest Rates

Commercial banks are reacting to the outflow of deposits by raising interest rates on both deposits and savings accounts. This is a direct response to the increasing cost of financing as low-cost deposits dwindle. Hana Bank recently increased the maximum interest rate on its ‘Hana Term Deposit’ to 2.60%, while kakao Bank raised rates on one-year term deposits and free savings accounts by 0.10 percentage