Korea’s money circulation slows on market uncertainty

2018.11.15 13:53:09 | 2018.11.15 15:16:59

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More South Koreans are preferring to park their money in banks as uncertainties at home and overseas markets discourage investment.

According to the Bank of Korea on Thursday, the country’s turnover rate of demand deposits was 16.4 in September, the lowest since January 1987 when the rate stood at 16.3.

Demand deposits are accounts in which funds can be withdrawn at any time. The deposit turnover rate is measured by dividing the monthly amount of withdrawals by the average account balance. A lower rate means more people are keeping their money in the bank than taking it out.

The turnover rate had been as high as 100 in 1999 but gradually started falling in the following years. It hovered below 20 throughout last year and slipped to 18.2 in the third quarter of this year, the lowest quarterly rate since the first quarter of 1987 when the rate came at 17.9.

While the drop is partly attributed to the five-day Chuseok holiday in September, a bigger factor has been a general chill in investor sentiment given the uncertain economic environment.

Markets remain on edge amid the monetary tightening trend of the U.S. and escalating trade war between the U.S. and China. Korea also faces huge economic challenges at home, as it is pressured to raise its own interest rates despite sluggish growth and dismal job conditions.

Experts fear money circulation could dry up further if Korea’s real estate market freezes from the toughened government measures to cool property prices.

The latest foreign selloff has also spooked stock investors. In October alone, Korea’s main Kospi fell 13.8 percent and the junior Kosdaq about 19 percent.

By Lee Yu-sup and Kim Hyo-jin

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