Growth of S. Korea's short-term funds hit 7-year high in June

By Kim Soo-yeon
SEOUL, Aug. 10 (Yonhap) -- South Korea's short-term funds grew at the fastest
clip in almost seven years in June as investors were unable to find adequate
long-term investment vehicles and the government's fiscal spending increased, the
central bank said Monday.

The country's M1, the narrowest gauge of money supply, reached 362.1 trillion won
(US$296.3 billion) in June, up 18.5 percent from a year earlier, according to the
Bank of Korea (BOK). June's growth accelerated from an annual 17 percent gain in
May and marked the steepest expansion since August 2002 when M1 jumped 20.3
percent.
M1 covers which covers currency in circulation, demand deposits and savings at
money market deposit accounts.
"A jump in M1 in June means that people still continued to manage money on a
short-term basis amid a protracted economic slump," said Kim Hwa-yong, a BOK
official. "The government's increased fiscal spending also contributed to the
rise."
Meanwhile, the country's M2, a narrower measure of its money supply, grew at a
slower pace in June than the previous month as local banks remained wary of
expanding loans amid the slumping economy. The growth of M2 slowed for the 13th
consecutive month in June, the BOK added.
M2 advanced 9.6 percent on-year to 1,501.9 trillion won in June, slowing from a
9.9 percent on-year expansion in May, it added.
M2 covers currency in circulation and all types of deposits with maturity less
than two years at lenders and non-banking financial institutions, excluding those
at insurers and brokerage houses. The BOK said in a separate statement that M2 is
estimated to have grown in the mid-9 percent range in July.
The data comes a day before the BOK makes its monthly interest-rate decision.
Korea's central bank is widely forecast to freeze the benchmark seven-day repo
rate at a record low of 2 percent for the sixth consecutive month. It lowered the
rate by a total of 3.25 percentage points between October and February in a bid
to bolster the sagging economy.
sooyeon@yna.co.kr
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