A whopping 350 trillion won ($259 bn) is yet to find investment targets in South Korea. This is due to uncertainties in interest rate cuts and government policies.
Money market funds (MMFs) investing in short-term debt securities have hit an all-time high of 349.9 trillion won as of May 7, growing by 48 trillion won this year. However, the combined balance slightly dropped to 344.5 trillion won by May 13.
Institutional and retail investors have been withdrawing nearly 20 trillion won from domestic stocks. Meanwhile, there is still 350 trillion won that is yet to find investment targets in South Korea. Doubts persist over the country’s efforts to increase corporate values and eliminate financial investment gain taxes. The skepticism surrounding interest rate cuts has also deterred investors from exploring other assets like real estate.
President Yoon Suk Yeol’s promises to strengthen the stock market through the corporate value-up program and scrap capital gains taxes on financial investments have seen mixed reactions.
The government’s plans to cut corporate taxes and dividend income taxes require legal amendments. However, these amendments may face opposition in parliament, creating uncertainty. Additionally, the reintroduction of financial investment gains taxes in 2025 adds to the unpredictability in the market.
