In­vestors rush to sav­ings ac­counts rid­ing on rate hike

The Korea Times - - FRONT PAGE - By Jhoo Dong-chan [email protected]­re­atimes.co.kr

A 29-year-old of­fice worker, sur­named Kim, had been put­ting most of his sav­ings into stocks and cryp­tocur­ren­cies over the past year, but re­cently de­cided to place his money in a sav­ings ac­count af­ter banks in­tro­duced prod­ucts with in­ter­est rates of more than 4 per­cent.

“It was a party un­til the first quar­ter of this year,” he said.

“I made a de­cent amount of money by in­vest­ing in vir­tual coins on the back of the so-called bit­coin fever in Jan­uary, and then shifted to stocks. Re­turns on my in­vest­ment in Seoul stocks started de­te­ri­o­rat­ing in May, and have yet to re­cover at this point. Now, pes­simism is every- where. It’s bor­ing, but I have de­cided to take a stand with a com­mer­cial bank sav­ings ac­count un­til the storm passes.”

Other in­vestors are also shift­ing to cur­rent and sav­ings ac­counts as an al­ter­na­tive to the na­tion’s slug­gish stock mar­ket.

The re­cent base rate hike is an­other fac­tor be­hind the trend since not only se­cond-tier sav­ings banks but also com­mer­cial lenders have in­tro­duced var­i­ous cur­rent and sav­ings ac­counts guar­an­tee­ing an in­ter­est rate of over 3 per­cent.

The Bank of Korea (BOK) raised the base in­ter­est rate by a quar­ter per­cent­age point to 1.75 per­cent Nov. 30. The de­ci­sion came af­ter the cen­tral bank had main­tained the key rate un­changed at 1.5 per­cent for a year since Novem­ber 2017.

Re­flect­ing the BOK’s de­ci­sion, Shin­han Bank took the lead in rais­ing de­posit in­ter­est Dec. 3. The Shin­han Se­bae Dream sav­ings ac­count of­fers a 3.6 per­cent in­ter­est rate for cus­tomers who open their first sav­ings ac­count with Shin­han.

Other com­mer­cial banks — NH NongHyup, the In­dus­trial Bank of Korea and KB Kook­min Bank — also fol­lowed the trend by in­tro­duc­ing sim­i­lar prod­ucts ear­lier this month.

De­spite the grow­ing pop­u­lar­ity of sav­ings ac­counts, re­turns on rel­a­tively risky in­vest­ment, such as in stocks and eq­uity funds, have yet to hit bot­tom amid the na­tion’s slug­gish econ­omy.

Ac­cord­ing to fund re­searcher FnGuide, the av­er­age re­turn rate of the na­tion’s eq­uity funds was -16.28 per­cent while do­mes­tic bonds funds, which are con­sid­ered to be rel­a­tively sta­ble, marked 2.4 per­cent as of Dec. 5.

The re­turn ra­tio of over­seas eq­uity funds was also -8.83 per­cent in the mean­time.

Ex­perts say the BOK isn’t likely to raise rates next year due to the na­tion’s slug­gish econ­omy.

“I ex­pect the na­tion’s key rate will stay un­changed next year,” said Meritz Se­cu­ri­ties an­a­lyst Yoon Yeo-sam said. “Ex­ter­nal fac­tors as well as the on­go­ing down­turn are ex­pected to be pro­longed for a while.”

The In­ter­na­tional Mone­tary Fund re­cently down­graded Korea’s eco­nomic growth rate next year to 2.4 per­cent in a re­cent re­search re­port.

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