Major shift in Korea’s household asset investment

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Today’s topic is the major shift in the way of investing household assets. As you can see from the title itself, household assets have started to seek for unconventional investment products because the world economy is still in a deep depression and doesn’t seem to get better.

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People usually do not expect high returns by depositing in a bank or making investments in widespread investment plans such as CMA (Cash Management Account), MMF (Money Market Fund) and so on. Instead, they seek for high profits by investing in high risk products As mentioned above, the world economy doesn’t seem to get better but global investment banks and financial institutions consider Korea as one of the most stable economic environment existing. This is clearly shown in the KOSPI market which has passed the 2000 mark. Likewise, Korea’s investment and financial institutions are launching various financial instruments. According to the Bank of Korea, such phenomenon has been witnessed more clearly since 2002. The volume of domestic securities investment has shown a rapid increase, 159 trillion won in 2002 and 296 trillion won in 2013. However, the volume of government bonds has decreased a little bit.

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Financial experts say that such phenomenon is a natural thing and there is absolutely no need to worry about. They argue that this is a common process as Korea is turning into a financial society from an industrialized one. This means that assets which had been saved for the long term of industrial society are now looking for a new means to make high returns. At the same time, domestic banks are competitively launching financial instruments such as ELW (Equity Linked Warrant), ELS (Equity-Linked Securities) and DLS (Derivative Linked Securities). Moreover, Korea is turning in to an aging society at a rapid pace which is making the middle class to invest their assets in seek of stable income source after retirement.

This kind of phenomenon is expected to stimulate and vitalize Korea’s investment environment. People are looking for more various investment instruments, and this is exactly what the financial industry should provide right now.

By Hyok Hee Kwon (kwonhyokhee@naver.com)

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