Interest Rates Rise Back-to-Back... Will Stocks Shrink and Deposits Grow?

[Anchor]

It is time for Friendly Economy on Friday, and reporter Han Jiyeon is here with us. Han, overnight, Europe also raised its benchmark interest rate, and the yield on the U.S. 10-year Treasury is heading toward 5%. Rising interest rates seem to be a global trend.

[Reporter]

Banks are raising their deposit rates one after another.

With NongHyup Bank joining in today (September 11), four major banks are raising their rates just this week.

Shinhan Bank took the lead the day before yesterday by raising its rate from 3.2% to 3.4%, followed by Hana Bank and Woori Bank yesterday, and now NongHyup Bank today, passing the baton by increasing rates by up to 0.3 percentage points.

As a result, regular deposits at the five major commercial banks have entered the low-to-mid 3% range.

The reason banks are raising rates in this competitive manner is simple.

Market interest rates as a whole are on the rise, and with the Bank of Korea's base rate also going up consecutively, banks have no choice but to raise theirs as well to avoid losing customers.

However, if you look beyond the five major banks, there are much higher rates available.

If you search for "deposit interest rates," you can find quite a few special products from regional banks or savings banks that offer up to the upper 3% range if you meet all the preferential rate conditions on top of the base rate.

In fact, as deposit rates rise like this, signs are emerging that money that previously flowed into stocks is returning to banks.

Last month, commercial bank time deposits increased by more than 20 trillion won, expanding significantly for the second consecutive month.

[Anchor]

Looking internally at South Korea, indicators such as inflation, income, and growth rates are all pointing in the same direction.

[Reporter]

In a report submitted to the National Assembly yesterday, the Bank of Korea itself left open the possibility of further base rate hikes, indicating that the tightening cycle is not over yet.

The Bank of Korea regularly submits economic diagnosis reports to the National Assembly.

In this report released yesterday, the central bank stated that there is room to further raise the base rate, following consecutive hikes in July and August.

There are three main reasons for this.

First, inflation is showing unusual signs.

Core inflation, which excludes volatile items like oil and vegetable prices to measure underlying price trends, has reached its highest level in three years since May 2023.

Second, semiconductor export prices have surged significantly.

In fact, the real growth rate in the first half of this year, which measures the extent of increased production, stood at 3.8%. However, due to skyrocketing semiconductor export prices, the nominal GDP growth rate—which reflects not only production volume but also product prices—surged to the low 20% range compared to the same period last year.

A nominal growth rate of this magnitude has not been seen since the early 1990s.

Third, housing prices and household loans.

Last month alone, mortgage loans surged by 4 trillion won in just a single month.

With inflation, growth rates, and housing-backed loans all showing alarming trends, out of 21 interest rate forecasts for six months out submitted by seven Monetary Policy Board members at the August meeting, 16 predicted rates higher than the current 3%, with a forecast of 3.25% being the most common, chosen 10 times.

[Anchor]

We have been talking about interest rates, but the fact that the Gangnam three districts shifted to a downward trend must be seen as being predominantly influenced by taxes.

[Reporter]

That is correct. Following Gangnam and Seocho, Songpa has also turned downward.

All three districts in the greater Gangnam area have shifted to a weak trend.

According to statistics from the Korea Real Estate Board, for the first week of September, Gangnam-gu fell by 0.35%, Seocho-gu by 0.3%, and Songpa-gu by 0.02%, marking a return to a downward trend for the first time in 21 weeks.

The three districts in Gangnam have all turned downward side by side.

This is interpreted as an atmosphere of taking a wait-and-see approach taking hold, as discussions continue regarding tax law revisions that would increase tax burdens.

However, looking at Seoul as a whole, the story is completely different.

Prices have been rising without a break for 83 weeks, which is more than a year and a half.

It is getting very close to the all-time record of 85 weeks.

The areas that saw higher increases this time are outer districts of Seoul, such as Gwanak-gu rising by 0.41% and Seodaemun-gu by 0.43%.

The pace of growth is actually steeper than the margin by which the Gangnam three districts declined.

This topic was also addressed in yesterday's BOK report, which specifically pointed out that while the Gangnam three districts have cooled down, outer districts and regulated areas in Gyeonggi Province are rising even further.

In particular, in the so-called semiconductor belt where semiconductor companies are clustered—such as Dongtan in Hwaseong, Yongin, and Yeongtong-gu in Suwon—transactions at all-time high prices in the first half of this year alone increased more than eightfold compared to last year.

To summarize, while the Gangnam three districts have fallen, the real embers continue to burn in mid-to-low-priced outer areas where homes are purchased with borrowed loans.

※