The bank sector's household loan volume rose by 6.9 trillion South Korean won last month, reflecting an over three-fold increase in the monthly growth rate. This spike was fueled by growing interest in stock investments after the KOSPI climbed and improved activity in real estate deals in the metropolitan area, resulting in higher demand for various types of individual loans such as credit loans and negative balance accounts along with mortgages.
As per the Bank of Korea's publication called *‘May Financial Market Trends,’* issued on the 11th, bank-based household loans rose by 6.9 trillion South Korean won during the previous month. This rise surpassed threefold the increase seen in April (2.1 trillion South Korean won) and also outperformed the figure for the corresponding period last year (5.2 trillion South Korean won). As a result, the total amount of household loans within the banking system climbed to 1,181.8 trillion South Korean won.
The expansion was driven by various types of loans such as personal credit loans, negative balance accounts, and equity-secured loans. These loans shifted from a decline of 600 billion South Korean won in April to a rise of 3.7 trillion South Korean won in May. According to the Bank of Korea, there was a substantial surge in loan requests due to major individual stock investments occurring alongside spending demands during the holiday season.
Certainly, the KOSPI climbed to 8,476 by late May, fueled by a booming semiconductor industry and hopes for better company profits, before reaching an all-time peak of 8,801 on June 2. Nevertheless, it subsequently declined due to growing concerns about potential interest rate increases from the U.S. Federal Reserve. Equity-focused mutual funds saw their balances rise by 58.8 trillion South Korean won, supported by higher valuations resulting from increasing share prices along with fresh investments amounting to 7.6 trillion South Korean won. Total assets managed by investment firms also expanded by 86.4 trillion South Korean won, reflecting a significant influx of capital into the equity markets.
Mortgage lending rose by 3.2 trillion South Korean won, marking an expansion compared to the prior month's rise of 2.7 trillion South Korean won. Although jeonse loans remained downward, this trend was due to higher property dealings focused on medium-to-low cost residences within the metropolitan area as well as greater interest in temporary payments for ongoing pre-owned new construction projects. Apartment transaction volumes in Seoul hit 8,500 units during April, representing a notable jump from the preceding month’s total of 5,500 units.
Corporate lending also kept increasing. In May, bank corporate loans rose by 10.6 trillion South Korean won, staying at a level comparable to the prior month's 10.7 trillion South Korean won. SME loans climbed by 5.4 trillion South Korean won as part of an initiative aimed at broadening productive financing, whereas loans for major corporations went up by 5.2 trillion South Korean won because of demands for working capital to settle corporate bonds.
On the contrary, corporate bond issuing decreased because of the pressure from increasing interest rates. As businesses turned to other financing options like bank loans, corporate bonds experienced a net withdrawal of 1.1 trillion South Korean won, with commercial paper (CP) and short-term bonds also moving toward net withdrawals.
