South Korea Sees $16 Billion Flow into Bank Deposits in Two Weeks Amid Rate Hikes

South Korean banks are rapidly increasing their deposit rates, prompting a substantial return of funds to savings and time deposits. This trend, dubbed the 'reverse money move,' is gaining traction following the Bank of Korea's decision to raise its benchmark interest rate for the first time in three and a half years, with indications of further hikes.

Major commercial banks like KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup have adjusted their rates. Shinhan Bank, for instance, raised its annual interest rate for its 'Sollpyeon' fixed deposit to 3.2% starting Tuesday, and will increase rates for 13 other fixed deposit products by 0.2-0.4 percentage points and 17 installment savings products by 0.1-0.3 percentage points from Wednesday. Woori Bank also raised its deposit rates by 0.25-0.30 percentage points starting Monday.

These adjustments reflect the market interest rate fluctuations following the central bank's policy change. Shinhan Bank is also offering special promotional rates, including up to 3.3% for a one-year fixed deposit and up to 3.4% for customers aged 50 and above.

The surge in deposits is evident, with the total balance of fixed deposits across the five major banks reaching 965.29 trillion won as of July 15. This marks an increase of nearly 16 trillion won in just fifteen days. In contrast, balances in more liquid accounts like savings accounts and MMDA have decreased by 17.78 trillion won during the same period.

Analysts suggest that the rising interest rates could negatively impact the stock market. Higher deposit yields may diminish the appeal of riskier stock investments for investors. Furthermore, increased borrowing costs for companies and a reduced present value of future earnings could exert downward pressure on stock prices.