I can't trust stocks or bonds...money for the MMF

 

More funds are being collected by money market funds (MMF). This is attributed to a stronger tendency to avoid year-end volatility amid growing uncertainties in the stock and bond markets.

 

According to the Korea Financial Investment Association, the balance of MMF stood at 194.9673 trillion won as of Tuesday. Compared to 169.502 trillion won in early October, it increased by 25.46 trillion won.

By investment entity, individuals accounted for 14.71 trillion won and corporations for 180.2539 trillion won, down 177 billion won from early October, but corporations saw a sharp increase of 25.642 trillion won.

MMF is a product that invests in corporate paper (CP), transfer deposit certificate (CD), and government bonds with a maturity of less than one year. Since it is free to buy back, it is used for short-term investment and is also considered a stock market standby fund. It is interpreted that the preference for MMF, a less volatile investment destination, has increased as the bond's investment attractiveness has also fallen than before, with growing volatility in the stock market and falling market interest rates.

Recently, the stock market has been showing great volatility. The KOSPI index, which fell to 2,277.99 points at the end of October, rose to 2,502.37 on the 6th of this month It fell to 2403.76 on the 13th, and has been recovering since then. The same is true of the bond market. The three-year treasury bond rate hit 4.108 percent per annum in early October, but fell to 3.644 percent on Nov. 21 after showing a downward trend in November.

As a result, a net sale of government bonds appeared this month. According to the Korea Financial Investment Association, government bonds sold a net 270.2 billion won in the over-the-counter bond market from the beginning of this month to the 21st. Most institutions, except for foreigners, the state, local governments, individuals and other corporations, sold net government bonds. The total net purchase of over-the-counter bonds was KRW 26.1491 trillion, which is less than KRW 43.9038 trillion last month.

The U.S. is also converging funds into MMF. According to the U.S. Asset Management Association (ICI), the amount of money market funds set as of the 15th of this month reached a new all-time high of USD 5.7339 trillion (about KRW 7451.7764 trillion). Money seems to have been driven to MMF in anticipation of the end of the US Federal Reserve (Fed) interest rate hike.

However, some analysts say that MMF will lead the stock market and bond market in the future as it is a stock market atmospheric fund. Baek Chan-kyu, a researcher at NH Investment & Securities, said, "MMF, which has reached an all-time high, is expected to be quickly used as investment funds when the financial environment is eased." The spread of investment funds next year is expected to stimulate economic dynamics and stock market revitalization, he said.