Short-term floating fund exceeds 800 tln won in April: data

SEOUL, May 18 (Yonhap) -- South Korea's short-term floating fund exceeded 800
trillion won (US$623 billion) for the first time in April as the government
injected liquidity to unfreeze a tightened credit market and money flowed in on
expectations the economy may turn around, data showed Monday.
According to the data provided by the Finance Ministry and the Bank of Korea,
so-called floating funds, or money moving in and out of investments in search of
higher profits, amounted to 811.3 trillion won at the end of last month, up from
the previous month's 795 trillion won.
The April figure is the highest ever and compares with 719.5 trillion won at the
end of September when global financial turmoil first started to impact the local
economy.
The sharp increase is attributed to the government's additional fiscal spending
since last year under which a large amount of liquidity was unleashed into the
market, as well as an increase in the money flow on expectations the economy may
be nearing a bottom, experts say.
Concerns are mounting that an "excessive" amount of liquidity was unleashed,
leading to a possible bubble and speculation in stock and property markets, which
had been hart-hit by the financial turbulence that started last summer in the
U.S.
The government said recently that it "recognizes" the concerns" and is "closely
watching" market conditions as it considers channeling the money into more
productive parts of the real economy.
On Thursday, the state-run think tank Korea Development Institute recommended
authorities consider absorbing excess liquidity or a rate cut to tighten the
money flow even before the economy bounces back.
As South Korea's economy is feared to lapse into a recession for the first time
in more than a decade this year, the government has unveiled diverse pump-priming
measures including added fiscal spending and tax cuts.
Last month, parliament endorsed a record 28.4 trillion won extra budget aimed at
generating jobs and bolstering domestic demand. The central bank has slashed its
key interest rate by 3.25 percentage points since October to a record low of 2
percent.
Some indicators are showing that such measures are paying off. In the first
quarter, the nation managed to avert a recession as gross domestic product rose
0.1 percent from three months earlier following a 5.1 percent plunge in the
fourth quarter.
The government earlier pledged that it will maintain its expansionary policy
stance until the economy fully recovers.
"We recognize the concerns but now is not the time to absorb liquidity. It is
time to do our best to make it flow well to the real part (of the economy),"
Finance Minister Yoon Jeung-hyun told Yonhap News Agency in a recent interview.
kokobj@yna.co.kr
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