Stocks now make up more than 20% of household assets as retail investors put their money in stocks rather than zero-return savings accounts.
According to the Bank of Korea, bank deposits still represent 41% of the 4.9 quadrillion won of household assets, but stocks represent 20.8% and bonds 2.3% (1 USD = 1,244 won).
Of the holdings, 19.2% were domestic stocks and 1.6% foreign stocks. Domestic equity holdings rose 87.6 trillion won year on year amid the stock market bonanza, while foreign equity ownership rose 22.9 trillion won, the largest increase on record.
While the proportion of equities among household assets is low compared to 36.9% in the United States and 22.2% in France, it is higher than Japan’s 10.9% and 10.4 % of the UK, reflecting complex differences in mentality.
Until 2019, stocks accounted for only about 15% of household assets in Korea, but this rose sharply after the onset of the coronavirus pandemic, with the third fastest increase in the OECD after Turkey and Israel.
The BOK said the trend is unlikely to continue this year as the stock market crashed. BOK’s Bang Joong-kwon said: “The flow of money began to shift to safer destinations such as bank deposits in the second half of last year as jitters spread across the possibility of rising interest rates.”
Domestic equity investment rose 65.6 trillion won in the first half of 2021, but fell to 22 trillion won in the second half. In contrast, money placed in long-term deposit accounts decreased by 10.6 trillion won in the first half, but increased by 16.1 trillion won in the second.
Meanwhile, bank lending hit a record 189.6 trillion won last year as customers borrowed for a float on the stock exchange, while credit card spending also hit a new high of 10.4 trillion won.
“Household debt has increased due to continued demand for housing compounded by a pickup in private spending,” Bang said.
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