Idle cash parked in short-term instruments is starting to move toward South Korea's stock market after the KOSPI broke out of a roughly six-week trading range and reclaimed the 7,000 level. Money market funds have shed nearly 19 trillion won in recent days, while investor deposits — cash that can be tapped immediately to buy shares — rose by more than 14 trillion won. Balances in cash management accounts have also turned higher again.
Assets in money market funds stood at 248.1362 trillion won as of the 10th, according to the Korea Financial Investment Association on the 11th. That is down 18.9525 trillion won from 267.0887 trillion won on the 4th of this month, a drop of nearly 19 trillion won in just five days. Investor deposits moved the other way over the same period, rising 14.1073 trillion won to 107.6573 trillion won from 93.55 trillion won. More than 10 trillion won of that increase came in just two trading sessions, on the 9th and the 10th.
Money market funds are a common parking place for idle cash, allowing withdrawals at any time while earning returns from short-term instruments. Investor deposits are funds that investors leave in brokerage accounts to buy stocks and other securities. The market is watching the possibility of a shift in cash because large outflows from short-term instruments coincided with a rise in money waiting to be invested in equities. The KOSPI closed at 6,909.91 on the same day, down 124.01 points, or 1.76%, from the previous session, as Brent crude and West Texas Intermediate topped $100 a barrel and U.S. Treasury yields surged. Even so, the index has moved between 6,900 and 7,000 for five straight sessions since the 7th of this month, which analysts read as the index building a floor.
Cash has also been flowing back into brokerages' cash management accounts. CMA balances rose 601.1 billion won to 105.4831 trillion won on the 9th from 104.882 trillion won on the 4th of this month. Balances in repo-type CMAs, which are invested in repurchase agreements, climbed 724.5 billion won over the same period to 45.0492 trillion won from 44.3247 trillion won. Because brokerages invest client money held in CMAs in repos, money market funds and short-term notes, a rising balance suggests that cash not yet put directly into stocks is sitting near brokerage accounts.
The recent pattern contrasts with the flows seen since June this year. Money market fund assets, at about 224.3 trillion won at the end of June, swelled quickly as market volatility widened, reaching the 260 trillion won range in early September. Investor deposits shrank over the same stretch, falling to the 90 trillion won range early this month from about 137 trillion won in May. CMA balances also declined to the 104 trillion won range in early September from 110.502 trillion won at the end of June. Repo-type CMA balances fell to the 44 trillion won range from 46.7199 trillion won over the same period. Even as stocks rose, investors were more inclined to keep money in short-term instruments than to buy aggressively.
Market participants read the change as a response to the KOSPI's return above 7,000. Money is leaving money market funds while deposits climb quickly, and CMA and repo-type balances that had been falling are rebounding. It is too early to say the idle cash has translated into actual stock purchases, but the shift can be seen as an early signal that the center of gravity for market cash is moving from short-term instruments toward brokerage accounts. The margin loan balance, a gauge of leveraged investing, stood at 32.3599 trillion won as of the 10th and has been rising since the 4th of last month, when it was 27.4038 trillion won. "Even with high macro uncertainty still in place, the KOSPI has been recovering the 7,000 level, accompanied by a breakout in semiconductor-related assets," said Kang Jin-hyuk, a researcher at Shinhan Securities. "That suggests the supply-demand balance is shifting toward buyers more than before."
