Changes in Individual Asset Management

According to July 17 report from the Bank of Korea, financial assets of individuals increased to 1,097 trillion won as of March, and increase of 195 trillion or 21 percent in three years.

Among individual financial assets, the proportion in bank accounts fell 4.71 percent from 62.41 percent in the first quarter of 2002 to 57.70 percent in the same period in 2005.

Meanwhile, over the same period, indirect investment increased from 6.58 percent to 7.30 percent, and insurance and pensions rose from 18.20 percent to 20.69 percent.

Dong-a Ilbo’s survey of 105 experts of leaders from private banking centers (PB) of five domestic banks and nine securities firms and other financial consultants, 63 experts or 60 percent of respondents replied that assets of huge clients are leaning toward stock investments.

38 people or 36.2 percent answered no changes, and four percent said real asset investments are on the rise.

PB is a sales branch that financial firms operate in order to provide financial services to customers with over 100 million to one billion won.

Among them, 93 experts, or 88.5 percent, expected the structure of personal assets to change in future, and 80 or 86.0 percent responded that the change is in favor of stock investment.

On the question of prosperous investment destinations, 71 people or 67.7 percent pointed out securities investment and 23 or 21.9 percent picked real estate. However, they preferred indirect investment rather than direct investment.

According to the Information and Consulting Fund, the size of installment funds which fuel indirect investment skyrocketed from 1.95 trillion won at the end of last year to 3.62 trillion won this June. The Asset Management Association of Korea said there are 6.52 million fund accounts as of the end of last May, of which 2.80 million are installment funds.

Sixty people or 57.1 percent said that the bullish stock market would benefit the stabilization of real estate while 40 or 38.1 percent said otherwise.

Ji Dong-hyun, a senior researcher at the Korea Institute of Finance, maintained, “As indirect investments, including installment fund accounts, expand, money flowing into the real estate market is on the decline. Large fundamental changes of financial asset structure have started.”

Wan-Bae Lee roryrery@donga.com sublime@donga.com