Consumer deposits at commercial banks add by record $24 bn in Korea in Aug.

A record 34 trillion won ($23.9 billion) was added to consumer deposits at commercial banks in South Korea in August as investors flocked to safe assets amid rising interest rates by the uninterrupted aggressive tightening by both the Bank of Korea and the U.S. Federal Reserve.

According to Monetary and Liquidity Aggregates report released by the Bank of Korea on Tuesday, fixed and periodical deposits jumped 34.1 trillion won in August from a month ago, the biggest monthly gain since the central bank began compiling related data in December 2001. The previous record was a gain of 22.7 trillion won in January.

Consumer deposits at commercial banks have surged this year as fixed and periodical installment savings accounts are considered safe assets in an environment where base interest rates are facing north while stock market south. The Kospi lost 24.91 percent this year as of Tuesday.

“It comes natural that funds flow into safe assets following key rate hikes,” said Sung Tae-yoon, professor of economics at Yonsei University. “Companies are also making moves to secure liquidity amid increased economic uncertainty.”

Money market deposits, on the other hand, fell 11.1 trillion won in August from a month ago, data showed. It was the biggest drop after extending the losing streak for five straight months. Money market deposits are categorized as liquidity of cash level but offer relatively low interest rates compared with other deposits. Demand deposits also fell 10.1 trillion won over the same period.

Korea’s money supply, meanwhile, surged in August.

The country’s M2, a key gauge of the money supply, stood at 3,744.1 trillion won in August, up 0.7 percent on month, BOK data showed, marking the fifth straight month of gain.

Bond investments that are not included in M2 are flocking to fixed and periodical deposits amid interest rate hikes. On an on-year basis, however, the money supply grew 7.2 percent to slow down for an 8th straight month after 13.2 percent in December.

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