Stock Market Rally Fuels Surge in Money Supply

The recent uptick in the stock market has significantly boosted investment funds, leading to a remarkable increase in the money supply for May. The Bank of Korea's latest statistics reveal a 1% rise, translating to an additional 44 trillion won.

Understanding the M2 Broad Money Supply

M2, a broad measure of money supply, encompasses not just cash and demand deposits but also short-term financial products easily convertible to cash. After a brief decline in March, M2 has now seen two consecutive months of growth, marking a 6.5% increase compared to last year.

Investment Trends and Economic Impact

Investment funds have swelled by 16.4 trillion won, with stock-type securities leading the charge. Meanwhile, money trusts and savings deposits have also seen significant increases, attributed to various financial activities and local government fiscal executions.

Conversely, demand deposits have dipped by 2.3 trillion won, as investors pull out standby funds in response to the recovering asset market.

Sector-Wise Liquidity Changes

Liquidity has risen across the board, with households, businesses, and financial institutions all experiencing growth. The narrow money supply M1 has also turned around, showing a 4.6 trillion won increase, primarily fueled by savings deposits.