[Edaily Reporter PARK JONG-HWA ] As the monetary tightening cycle gains momentum, the flow of capital in asset markets is accelerating. With domestic and international interest rates expected to continue rising, dollar-denominated assets and cash are emerging as new investment alternatives to the domestic stock market.

On the 2nd, E-Daily conducted an emergency survey of 14 private bankers (PBs) from major domestic financial institutions. The results showed that 11 PBs—nearly 80%—responded that “high-net-worth individuals (with financial assets of 1 billion won or more) have either adjusted their asset portfolios in line with rising interest rates or are considering such adjustments.” While most funds poured into the stock market during the rally that began last year and continued through the first half of this year, the need to find new investment opportunities has grown as the stock market has recently remained sluggish and central banks around the world have signaled a trend toward interest rate hikes.

As volatility has increased due to interest rate hikes and stock market instability, high-net-worth individuals have increasingly adopted a wait-and-see approach while securing cash-equivalent assets. Choi Kyung-min, a WM specialist at NH Nonghyup Bank, stated, “In the current market environment marked by heightened volatility, there is a strong tendency to hold cash and monitor the market rather than make aggressive portfolio changes.” Lee Yoon-ji, Team Leader at the Suji PB Center of KB Kookmin Bank, also explained, “In response to interest rate hikes, there is a trend toward reducing the proportion of liquid assets and increasing the proportion of fixed-rate products.” Private bankers are recommending savings bank deposits offering high interest rates or short-term deposits with maturities of less than three months as diversification options in this volatile market, especially since the deposit insurance limit was recently raised to 100 million won.

As the interest rate differential between South Korea and the U.S. narrows and the won-dollar exchange rate falls compared to the beginning of the year, demand is also rising to acquire dollar-denominated assets—such as U.S. stocks—at relatively low prices. This is based on the calculation that, given the U.S. Federal Reserve has signaled the possibility of interest rate hikes, investors could benefit from exchange rate gains if U.S. interest rates rise and the dollar strengthens in the long term. Min Se-jin, head of the PB team at Shinhan Premier PWM Seoul Finance Center, said, “Investors are showing a lot of interest in U.S. investments due to the falling exchange rate, and funds are flowing heavily into overseas equity funds such as the S&P 500 Index.” He added, “We are seeing a trend where investors are taking advantage of the exchange rate, which has fallen to the 1,300 won range, to acquire both dollar-denominated assets and assets linked to the dollar.”