Total net asset value of money market fund (MMF) in South Korea topped 120 trillion won ($102 billion) for the first time in nearly four months last week as investors sought after short-term investments partly due to growing uncertainties in the financial markets at home and abroad.
According to the Korea Financial Investment Association on Monday, the total net asset value of MMFs as of May 8 amounted to 120.2 trillion won, up 1.2 trillion won from a day earlier and the largest since Nov. 16, 2018. It also was the first time for the volume to exceed 120 trillion won since Jan. 16 this year.
Total MMF assets under management added 1.2 trillion won to 119.3 trillion won over the same period, the largest since Jan. 16.
Against March 29 this year when the market’s capital needs peaked for a quarter closing, total net asset value of MMF has gained 20.4 trillion won or 20.4 percent. The total MMF assets under management grew 20.2 trillion won or 20.3 percent over the same period.
Money market fund invests in short-term debt securities such as government bonds and commercial papers with a maturity of a year or shorter. Investors commonly use MMF accounts to temporarily park money withdrawn from securities investments. Typically, MMF assets under management grow when uncertainties in the financial market increase and decline when market conditions are favorable.
Global markets including the Korean financial markets were roiled last week by the protracted trade dispute between the world’s two biggest economies the United States and China as they failed to come up with a much-anticipated agreement. Blaming the last-minute changes in the agreement, the U.S. upped its tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent as of Friday. After a volatile week, global markets have returned calm somewhat after the two sides agreed to continue their negotiations.
Market experts also attributed the recent flow into MMFs to seasonality as MMFs commonly attracts funds in the beginning of a term, like year, quarter, and month after businesses spend working capital at the end of each term.
Total 11.2 trillion won flew in to MMFs over the four consecutive trading days until May 8 whereas 9.4 trillion won ebbed out during the last four trading days in April. During the first four trading days of last month or the start of a new quarter, MMFs drew in 15.1 trillion won.
By Kim Je-lim and Cho Jeehyun
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