Korean investors flock to MMFs and stock funds as market revives

Korean investors flock to MMFs and stock funds as market revives. [Source : Gettyimagesbank]

Investment capital is flooding into the mutual fund market in Korea as stock markets rebound.

According to the Korea Financial Investment Association on Sunday, investments in mutual funds increased by 30.05 trillion won ($24.4 billion) from Jan. 2 to 11, showing a sharp contrast from the same period a month ago when it dropped by 1.3 trillion won. On Jan. 3, more than 12 trillion won was injected.

Money market funds (MMFs) have been popular with companies seeking places to manage their short-term cash reserves. Data from local financial market tracker FnGuide shows that Samsung Smart MMF Institutional funds have attracted 6.85 trillion won in the recent three months.

As the 1-day repurchase rate has fallen sharply below the benchmark interest rate, more investment capital is flowing into the corporate MMFs that are beginning to yield more, said an official from Samsung Asset Management.

However, the excessive shift to MMFs is expected to ease gradually, suggested an asset manager, noting that the 1-day repurchase rate has jumped to 3.45 percent after the Bank of Korea delivered a rate hike last Friday.

Meanwhile, stock funds are also rapidly pulling in investors again.

Investment in domestic stock funds, designed to invest in stocks listed in Korea, increased by 222.4 billion won from Jan. 1 to 11, and investment in overseas stock funds rose by 40.8 billion won.

The stock fund market had seen an outflow of 400 billion won from September to November last year.