South Korea's Money Supply Hit Highest Increase Rate in 13 years

As individual investors have sold risky assets such as stocks due to the base interest rate hike, S. Korea's money supply surpassed 39 trillion won, hitting the highest rate. The increase rate is the highest level in 12 years and 11 months.

According to the Bank of Korea's report, 'Currency and Liquidity in November 2021' released on the 12th, the money supply in the market (based on M2) increased 39.4 trillion won (1.1%) month-on-month to 3589.1 trillion won in November 2021. Compared to a year ago, it increased 12.9% from the previous month (12.4%).

This is the highest level in 12 years and 11 months since December 2008 (13.1%). M2 is a measure of the money supply that includes money market funds (MMF), regular deposits and instalment savings of less than 2 years, and beneficiary certificate in addition to M1 (cash, checking deposits, and easily-convertible money).

The money supply in the market first surpassed 3000 trillion won in April last year and has continued to hit the highest every month.

In November last year, the money supply increased in both households and businesses. By economic entity, the money supply in households and non-profit organizations increased from 17.2 trillion h to 1734.7 trillion won, up 1.0% from the previous month.

Jung Jin-woo, deputy director of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, said, "Although the increase rate of housing-related loans has been slowed down due to strong loan regulations, money invested in risky assets such as stocks is being transferred to deposits as the base rate rises."

The deputy director Jung also said, "The government's disaster relief fund also seems to be used for financial bonds or regular deposits." In November last year, retail investors sold a net 2.4 trillion won in the securities market, while deposits fell only 740 billion won. Mortgage loans, including Jeonse loans, increased by 2.4 trillion won in November, down in increase rate from the previous month (4.7 trillion won).

The money supply in the business sector rose 14.5 trillion won (1.4%) from the previous month to 1058.2 trillion won. Regarding this, deputy director Jung said, "This is because the direct asset investments such as paid-in capital increase have expanded with continuous financial support for small and medium-sized companies."