April 27, 2024

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[THE INVESTOR] Korean money market funds have suffered a huge capital outflow over the past month due to growing worries over a financial crisis in Turkey, data showed on Sept. 13.

The MMFs had a combined 105.2 trillion won (US$93 billion) under their management as of Sept. 10, down 20.2 percent from a yearly high of 131.9 trillion won on Aug. 8, according to the data from the Korea Financial Investment Association.

MMFs usually invest in short-term debt securities, such as Treasury bills and commercial papers, which are considered as safe as bank deposits but have a relatively quick and high return.

A decline in the amount of money deposited at MMFs is usually seen as pointing to the easing of market uncertainty or investor jitters. 

The latest drop, however, was attributed to another factor -- escalating investor concerns over a possible spread of the Turkish financial crisis to other emerging markets.

The association said the capital outflow might have stemmed from massive withdrawals from MMFs that invested in asset-backed commercial paper issued by Qatar National Bank.

Market watchers have voiced concerns that Qatar National Bank may be affected by the Turkish financial crisis due to its past acquisition of a Turkish bank.

But analysts predicted the capital outflow from MMFs to slow down since Qatar National Bank has repaid 280 billion won worth of ABCP based on bank deposits, which matured on Sept. 11.

By Song Seung-hyun and newswires (ssh@heraldcorp.com)