Korea’s money supply up $12.4bn as funds flow into brokerage accounts

(Yonhap)

South Korea’s broad money supply (M2) rose 18.5 trillion won ($12.4 billion) in March, reflecting stronger stock market activity and rising corporate cash flows, particularly related to dividend payments and short-term investment positioning, data showed on Wednesday.

According to data released by the Bank of Korea (BOK), the country’s M2 stood at 4,132.1 trillion won in March, up 18.5 trillion won from the previous month. It marked the fifth consecutive month of growth since November last year.

M2, a key gauge of liquidity, includes cash, demand deposits, savings deposits, money market funds (MMFs), short-term time deposits, beneficiary certificates, and repurchase agreements. It is widely used as an indicator of money circulating in the broader economy.

A notable driver of the increase was the surge in MMFs, which rose by 12.4 trillion won. These ultra-short-term investment vehicles are often used by financial institutions and securities firms to park idle cash.

“As stock trading increased, standby funds temporarily held by financial institutions such as securities firms also grew, leading to expanded short-term fund management,” said a BOK official.

Checking-type savings deposits also increased by 6.5 trillion won, driven largely by corporate inflows linked to dividend distribution schedules.

By sector, non-financial corporations saw the largest increase in holdings, rising by 34.9 trillion won. Other financial institutions increased by 1.6 trillion won, while other sectors, including social security organizations and local governments, rose by 200 billion won.

Holdings by households and non-profit organizations, on the other hand, saw a decline of 13.1 trillion won.

The monthly average balance of M1, a short-term money indicator, stood at 1,368.7 trillion won in March, up 0.7 percent from the previous month. Its on-year growth rate accelerated to 7.9 percent from 7.6 percent the previous month.

The monthly average balance of financial institution liquidity (Lf) reached 6,194.1 trillion won, up 0.5 percent from the previous month, while broad liquidity (L), which is based on end-of-month balances, fell 0.4 percent from the end of the previous month to 7,820.5 trillion won.

Meanwhile, the average balance of the former broad money (old M2) supply—calculated based on the previous standard which includes beneficiary certificates—stood at 4,625.1 trillion won, up 0.6 percent from the previous month and 9.3 percent from the same month a year earlier.