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Stock-related funds lure investors despite virus spread

(Yonhap)
(Yonhap)

Despite the ongoing coronavirus outbreak, the amount of funds floating around South Korea’s stock market hit an all-time high, market data showed Thursday.

The amount of capital available for stock-related funds marked nearly 124.91 trillion won ($105.3 billion) as of end-February, up 8.77 trillion won from a month earlier, according to latest market data.

The funds refer to equities looking for investment opportunities such as investor deposits at brokerage firms, repurchase agreement balances, margin debts and other funds.

The figure is the largest since the record of end-January 2018 that came in at 117.9 trillion won. Among the amount, investor deposits came to some 31.2 trillion won. RP balances and margin debts marked about 73.5 trillion won and 10.4 trillion won, respectively.

Market experts have attributed the surge in stock-related funds amid wide fluctuations in stock markets both at home and abroad to investors’ high expectations on stimulus packages and a possible interest rate cut, which will likely boost stock prices.

Korea proposed an extra budget bill of 11.7 trillion won Wednesday to help better deal with the new coronavirus and minimize the economic fallout from its outbreak here. The US Federal Reserve also cut its base rate to a target range of 1 percent to 1.25 percent a day earlier.

Its surprise rate cut has raised the possibility of a similar move by the Bank of Korea that froze its base rate at 1.25 percent on Feb. 27. The nation’s central bank may hold an emergency policy meeting prior to its next rate-setting Monetary Policy Board slated for April 9.

As the COVID-19 virus outbreak is widely expected to weigh further on the slowing Korean economy, some market watchers are of the view that it is premature to anticipate any rise in the local indexes.

Korea had reported over 500 new daily confirmed virus infection cases for nearly a week. Amid the possibility of future developments on the global pandemic, stock prices will likely rebound when the number of confirmed cases decreases.

“Looking back at the contagious disease cases, the stock market rallies when investors unfreeze their sentiments by confirming the slow pace of patient accrual,” said Cho Byung-hyun, an analyst at Yuanta Securities Korea. “The key to reach a market infection point amid the current virus outbreak would also be the speed of new confirmed cases.”

By Jie Ye-eun (yeeun@heraldcorp.com)
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