[Weekend Money] "Stock Market 'Money Move' to Continue in Second Half... Boost from Retirement Pensions and Policy"

Yuanta Forecasts "Additional Capital Inflows for Over Two Quarters"
Focus on National Strategic Industries: Defense, Robotics, and AI Infrastructure

Amid a clear money move into the stock market recently confirmed in the domestic financial sector, analysts have diagnosed that additional capital inflows will likely continue for at least another two quarters. Retirement pensions, which alone amount to a reserve of 500 trillion won, along with the government's aggressive stock market stimulus policies, are expected to serve as a kind of "booster." By sector, capital inflows are anticipated to concentrate on national strategic industries such as defense, robotics, and artificial intelligence (AI) infrastructure.

Lee Jaewon, a researcher at Yuanta Securities, stated in a recently released report titled "Era of Big Stocks: Causes and Future of the Stock Market Money Move," that "Looking back at previous money moves in the stock market, there is room for further continued capital inflows."

First, Lee identified the causes of the recent money move as routing through indirect products and the expansion of profit-based yield gaps. He noted, "While investor deposits have reached record highs, the growth rate of bank won-denominated deposits is slowing. Demand deposits have also failed to surpass the previous peak seen in 2022." He added, "Profit estimates for structurally growing industries such as semiconductors and industrials have been continuously revised upward, thereby improving stock returns. This is the cause of the widening profit-based yield gap."

As of the second quarter, client deposits have shown an increase for six consecutive quarters. Since 2000, the stock market has experienced longer periods of money moves only three times: in 2010 (Q1 2010~Q3 2011, seven consecutive quarters), in 2014 (Q2 2014~Q4 2015, seven consecutive quarters), and in 2020 (Q4 2019~Q4 2021, nine consecutive quarters).

Lee explained, "During those periods, the year-on-year growth rate of securities assets within household financial assets averaged 17.2%. Given that the average since 2009 is 7.9%, this indicates an increase in the proportion of stocks in household asset allocation, not just a simple increase in household assets." He further analyzed, "Considering that in the past, capital inflows continued for at least seven consecutive quarters, the current situation (six consecutive quarters) suggests there is capacity for money moves into the stock market to continue for at least two more quarters."

Lee also emphasized that this current money move could be more prolonged than in the past, citing two primary factors: retirement pensions and government policies. He said, "Although the proportion of principal-guaranteed assets remains high, it is rapidly declining every year. Government policies such as separate taxation on dividend income, the mandatory cancellation of treasury shares, and the revitalization of KOSDAQ can enhance the attractiveness of the Korean stock market, which has been undervalued even among emerging markets due to the 'Korea Discount.'"

As a result, Lee predicted that capital would continue to concentrate on large-cap and growth stocks. He explained, "Indirect investments by individual investors through products tend to focus on large-cap stocks, resulting in a passive market driven by indices. Most index-tracking exchange-traded funds (ETFs) use a market capitalization-weighted methodology, so when funds flow in, stocks with higher market caps attract more buying pressure." He added, "Recently, the ETF market is shifting its focus from passive to theme-based active products," and that capital inflows are expected to focus on national strategic industries experiencing structural growth, such as defense, robotics, and AI infrastructure.

This content was produced with the assistance of AI translation services.