Won-denominated bond balance is also at an all-time high
Interest growing due to expectations of interest rate cuts
KOSPI sold 12 trillion this year
On the afternoon of the 8th, the KOSDAQ closing price is displayed on the status board of Hana Bank’s dealing room in Jung-gu, Seoul. On this day, KOSPI closed at 2,717.65, up 3.44 points (+0.13%) from the previous trading day, and the KOSDAQ index closed at 860.57, down 11.72 points (-1.34%) from the previous trading day. Individual investors are withdrawing large amounts of money from stocks and investing in bonds. [사진 제공=연합뉴스]
Individuals are enthusiastic about bond investment. The analysis is that the attractiveness of bond interest rates has increased in the high interest rate environment and as investment methods have become simpler, the amount of personal funds flowing into the bond market has increased significantly.
Individual investors have withdrawn a large amount of money from the stock market this year, but are net purchasing bonds at a record scale. According to the Korea Financial Investment Association on the 8th, the net purchase of bonds by individual investors as of the 5th of this year was 12.6853 trillion won. It increased by 40% compared to the net purchase size of 9.017 trillion won during the same period last year.
This year, as of the 5th of this month, individuals had net sold 11.8245 trillion won in KOSPI. Even in the KOSDAQ market, where individuals have a buying advantage, the net buying volume was only 4.6368 trillion won. The movement of personal funds from the stock market to the bond market is becoming increasingly evident.
The balance of bonds held by individuals also increased to the largest ever. According to the financial information industry on the 8th, the balance of individuals’ won-denominated bond holdings was 51.7386 trillion won as of the 5th, a 50% increase compared to the same period last year (34.6043 trillion won). Until early 2022, the balance of individual won-denominated bonds was less than 1 billion won, but the balance increased more than five times in about two years.
The credit portfolio has also become more diverse. Until last year, individuals had mainly purchased bank bonds and corporate bonds in addition to government and public bonds, but this year they are also actively purchasing special bonds (public corporation and public corporation bonds, etc.). Individuals made a net purchase of 1.6027 trillion won worth of special bonds last year, and in just three months this year, they have already made a net purchase of 1.2357 trillion won worth. It is similar to the net purchase size of bank bonds.
Choi Seong-jong, a researcher at NH Investment & Securities, said, “As expectations that interest rates will no longer rise but fall, net purchases of special bonds with large durations appear to have become stronger.” He added, “Because of the perception that stocks are at their peak, people are turning to bonds rather than investing more in stocks.” “It is interpreted,” he said.
By investing in bonds, you can expect interest income and capital gains. If you hold it until maturity, you can receive interest payments, and if the market interest rate falls, the price rises and you can realize profits through mid-term trading.
The greater the duration (asset price sensitivity to interest rates), the greater the price increase when interest rates fall. In general, the longer the maturity of the bond and the smaller the coupon rate, the greater the duration. Typically, long-term Treasury bonds are bonds with high duration.
According to a recent report by Hi Investment & Securities, in the first quarter of this year, individuals concentrated their purchases of ultra-long-term treasury bonds (over 30 years) and increased net purchases limited to short-term bonds (less than one year) among bonds other than treasury bonds. Kim Myeong-sil, a researcher at Hi Investment & Securities, said in a report, “Individuals’ preference for ultra-long-term government bonds will continue due to interest rate cut bets. However, considering that one of the purposes of individuals’ bond investment is high interest income, credit duration is expected to be reduced to one year or less.” “It will happen,” he analyzed.
The diversification of bond products and increasing investment convenience in the securities market also had an impact on the expansion of individual bond investment. Meritz Securities reorganized ‘Bond 365’, a service dedicated to short-term private bonds, into a comprehensive bond service, adding bond products that can be traded on and off the market and providing customized information to investors. Samsung Securities was the first to introduce a bond small investment service through Mobile Trading Service (MTS).
Bonds can be purchased directly or invested indirectly through a bond exchange-traded fund (ETF). According to FnGuide, the amount set up in corporate bond ETFs has increased by 1.7747 trillion won since the beginning of the year. 313.6 billion won also flowed into government bond ETFs.
2024-04-08 11:23:38
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