- Amid a correction in South Korea’s stock market and extreme volatility, assets in ultra-short bond funds rose by more than 1.4745 trillion won ($1.07 billion) over the past month, serving as a haven for investor money.
- Waiting funds have continued to flow into major ultra-short bond funds including KB Tomorrow Dream Ultra Short Bond Securities Investment Trust, Korea Rating Select Short Bond Securities Investment Trust and Shinhan Ultra Short Bond Securities Investment Trust.
- Money has also flowed into cash-parking ETFs such as TIGER Money Market Active and RISE Money Market Active, while brokerages expect the volatile market and demand for short-term investment products to persist for now.
Forecast Trend Report by Period
Ultra-short bond funds approach 50 trillion won ($35.8 billion) in assets
More than 1.4745 trillion won ($1.07 billion) added over the past month
Cash-parking ETFs also attract fresh inflows
Products serve as a haven amid extreme volatility
More than 1.4745 trillion won ($1.07 billion) flowed into ultra-short bond funds over the past month as a sharp correction in South Korea’s stock market sent investors looking for a stable place to park cash amid extreme volatility.
FnGuide data showed 78 ultra-short bond funds had combined assets of 49.5552 trillion won ($35.8 billion) as of Aug. 6, up 1.4745 trillion won from a month earlier. That contrasted with outflows of 811.5 billion won ($586 million) in May and 4.9054 trillion won ($3.55 billion) in June.
Ultra-short bond funds mainly invest in government bonds and monetary stabilization bonds with less than one year left to maturity. They let investors manage money over short periods while seeking returns comparable to bank time deposits. Most also carry no redemption fees, making them relatively liquid.
Among individual products, KB Tomorrow Dream Ultra Short Bond Securities Investment Trust [Bond] drew 178.6 billion won ($129 million) over the past month. Korea Rating Select Short Bond Securities Investment Trust [Bond] attracted 170.7 billion won ($123 million), while Shinhan Ultra Short Bond Securities Investment Trust [Bond] took in 159.3 billion won ($115 million). Kiwoom The Dream Short Bond Securities Investment Trust [Bond] and Korea Rating Ultra Short Rate Mixed Asset Investment Trust also recorded inflows of 115.7 billion won ($83.6 million) and 101.5 billion won ($73.4 million), respectively.
Money has also moved into cash-parking exchange-traded funds that can be traded easily on the stock market. Koscom ETF Check data showed TIGER Money Market Active and RISE Money Market Active attracted 422.8 billion won ($306 million) and 380.9 billion won ($276 million), respectively, over the past month.
The Kospi slid 22.19% in July, and market-stabilization measures including 20-minute circuit breakers were triggered frequently. That has reinforced the role of ultra-short bond products as a refuge for cash.
An asset-management industry official said ultra-short bond funds have been widely sold as alternatives to money-market funds for both corporate and retail investors. The person added that waiting funds tend to flow heavily into ultra-short bond products whenever the stock market turns unstable.
Brokerages expect volatility to persist for the time being as the market searches for direction. Concerns remain over whether global big tech companies can sustain investment in artificial intelligence, while high oil prices and elevated interest rates linked to Middle East conflict, along with supply-demand distortions caused by leveraged investing, continue to weigh on sentiment. Demand for short-term investment products from investors staying on the sidelines may therefore continue.
Kim Min-kyu, an analyst at KB Securities, said August would likely be a period of back-and-forth between doubt and optimism as investors look for clues on rate stability. With rates unlikely to fall quickly, the stock market may need more time before staging a trend rebound to prior highs. Investors may also have to endure a longer stretch of volatility in the process.
Kang Hyun-ki, an analyst at DB Securities, said both the previously dominant bullish narrative around AI and the more recent negative narrative have their own logic. He expects the stock market to enter a sideways phase, with the market likely to pick a clearer direction again after more time passes and information accumulates.
Ko Jung-sam, Hankyung.com reporter (jsk@hankyung.com)