Financial Markets during March 2011

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PRESS RELEASE

April 11, 2011 Financial Markets Department

Financial Markets during March 2011

(Please note that the statistical figures used in this press

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1. Interest Rates

□ Treasury bond rates (3-yr) showed wide fluctuations from March, and stood at 3.76% on April 8, somewhat lower than the level at the end of February.

o In early March they rose to as high as 3.94% on March 4, due mostly to accelerating inflation, but then plunged to a low of 3.57% on March 15, owing primarily to the political unrest in the Middle East and North Africa and to the massive

earthquake and nuclear accident in Japan. The rates then rebounded, affected chiefly by eased concerns about overseas sources of anxieties.

o Foreign investors' net buying volume increased compared to the previous month

(+2.5 trillion won in Feb '11 → +3.0 trillion won in Mar).

□ CD ^(91-day) rates rose sharply, influenced mostly by the Base Rate hike on March 10.

Major Interest Rates

(%, %p) 　 End-'09 End-Oct End-Jan'11 End-Feb

(A) End-Mar Apr 8(B) B - A

￭ BOK Base Rate 2.00 2.50 2.75 2.75 3.00 3.00 +0.25

￭ Treasury bonds (3yr) 4.41 3.38 3.96 3.84 3.73 3.76 -0.08

￭ CDs (91-day) 2.86 2.80 3.05 3.17 3.39 3.39 +0.22

￭ Bank debentures

(3-month) 2.98 2.83 3.05 3.29 3.30 3.28²⁾ -0.01

￭ CP (A1, 91-day) 3.09 3.03 3.22 3.37 3.59 3.54 +0.17

￭ Corporate bonds

(3yr, AA-)¹⁾ 5.53 4.19 4.68 4.58 4.50 4.45²⁾ -0.13

￭ Corporate bonds

(3yr, BBB-)¹⁾ 11.56 10.27 10.76 10.66 10.58 10.52²⁾ -0.14 Notes: 1) Average interest rates on bonds rated by Korea's three private credit rating agencies.

2) Based on April 7 figures.

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2. Stock Prices

□ Entering March the KOSPI plunged, influenced by overseas causes of anxieties. It then soared from mid-March onward, however - driven largely by eased concerns about the factors causing anxieties and by expectations of improved performances by domestic firms - and hit consecutive record highs* in early April.

* 2,130p on April 5 (The previous record-high before this month was 2,116p on January 19, 2011).

(period-end, points) End-'09 End-Oct Jan 19 '11 End-Jan End-Feb Mar 15 End-Mar Apr 8

￭ KOSPI 1,683 2,051 2,116 2,070 1,939 1,924 2,107 2,128

o Foreign Investors shifted to a large net buying position from mid-March onward.

Dec '10 Jan '11 Feb Mar (1~11) (14~31) Apr 1~8

￭ Foreign investor net purchases

(in trillion won) +3.9 +0.7 -3.4 +1.0 (-1.7) (+2.7) +1.9

3. Flow of Funds

□ Deposit-taking by banks declined substantially in March, owing mostly to the influence of the spin-off of KB Kookmin Card*

(+14.3 trillion won in Feb '11 → -11.4 trillion won in Mar).

* The Bank financial debentures issued by Kookmin Bank (8.75 trillion won), which were in the past included in deposit-taking by banks, were transferred to KB Kookmin Card. Excluding their effect, deposit-taking

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o Time deposits increased sharply owing largely to continuous hikes in deposit rates since November 2010, and to the inflow of funds following the advance payments made to depositors at suspended savings banks. Instant access account deposits decreased greatly, however, influenced for example by payments of corporate taxes.

□ Deposits taken by asset management companies reversed to a slight increase, owing chiefly to inflows of bank funds into MMFs (-8.5 trillion won in Feb '11 → +0.6 trillion won in Mar).

□ Deposits taken by savings banks increased for the first time since November 2010, thanks to the large hikes in deposit rates

(-1.9 trillion won in Feb '11 → +0.7 trillion won in Mar).

Deposits at Major Financial Institutions

(end-period increase/decrease, trillion won)

2009 2010 2011 Outstanding

amount (end-Mar

2011)

Year Mar Year Mar Jan Feb Mar

￭DMBs¹⁾ 54.8

(72.6) -4.4 36.9 -16.2 2.1 14.3 -11.4(-2.7) 1,049.4

(Instant access

accounts²⁾) 41.1 -0.8 25.8 -8.3 1.8 5.2 -10.7 309.2

(Time deposits) 39.1 -2.8 95.7 4.0 3.7 10.2 9.3 495.9

(C Ds) -1.9 -1.3 -61.8 -9.6 -2.7 -2.0 -0.5 36.0

(Bank debentures)

-19.3

(-1.5) 1.7 -12.1 -0.5 0.4 0.4 -9.0(-0.3) 155.6

￭AMCs -27.6 -3.0 -16.7 6.1 -5.2 -8.5 0.6 302.0

(MMFs) -17.2 -3.7 -4.8 7.4 -2.0 -7.0 2.6 60.5

<Individuals> -1.6 1.3 -3.2 -0.1 -0.1 -1.3 -1.0 20.8

(Stock-type) -14.0 1.5 -25.2 -2.8 -1.0 1.1 0.2 101.3

(Bond-type) 15.8 1.4 6.5 1.8 -2.4 -3.3 -1.5 45.4

(Mixed-type) -7.8 -1.3 1.3 -0.4 -0.3 0.5 -1.9 31.1

(New funds) -4.4 -0.8 5.5 0.1 0.5 0.2 1.1 63.7

￭Savings banks 12.4 -0.6 3.8 1.8 -2.4 -1.9 0.7 73.2 Notes: 1) Excluding deposits of banks, the central government and non-residents.

2) Including demand deposits.

3) Figures in ( ) include industrial and bank financial debentures transferred.

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4. Corporate Funding and Household Credit

□ Bank lending to the corporate sector increased at a slower pace in March (+3.7 trillion won in Feb '11 → +2.8 trillion won in Mar). o Growth in lending to small and medium-sized enterprises (SMEs) accelerated slightly (+1.8 trillion won in Feb '11 → +2.0 trillion won in Mar), due mostly to demand for funds for

corporate tax payments which more than offset the resolutions of non-performing loans at quarter-end.

o Lending to large corporations grew at a slower pace (+1.9 trillion won in Feb '11 → +0.8 trillion won in Mar), owing mostly to their debt ratio management at quarter-end.

□ CP shifted to net redemption (+0.8 trillion won in Feb '11 → -0.8 trillion won during Mar 1~20) ― owing to debt ratio management at quarter-end and to large redemptions by energy corporations.

□ Net issuance of corporate bonds (public offerings) declined significantly (+2.4 trillion won in Feb '11 → +0.2 trillion won in Feb), largely affected by sluggish demand for issuance following the expanded issuance for rollover purposes prior to maturity seen during January and February this year, and by the increased amounts maturing.

□ Fund-raising through the stock market fell significantly

compared to February, when some financial groups had engaged in large paid-in capital increases

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Corporate Funding

amount (end-Mar

2011)

Year Mar Year Mar Jan Feb Mar

Bank loans¹⁾ 14.5 2.9 10.9 1.1 6.0 3.7 2.8 529.7

(Large cos.) -5.2 -0.6 11.8 0.5 2.3 1.9 0.8 92.3

(SMEs) 19.7 3.6 -0.9 0.6 3.8 1.8 2.0 437.4

Acquisitions of private placement bonds by

banks²⁾ -2.9 0.4 -9.2 -1.1 -0.3 -0.5 -0.5 15.2

CP (net)³⁾ -8.3 0.2 -3.4 -1.0 3.1 0.8 -0.8⁵⁾ 20.8⁵⁾

Corporate

bonds (net) 32.6 5.3 11.6 1.0 1.4 2.4 0.2 ‥

Stocks⁴⁾ 9.1 0.1 8.7 0.5 0.4 2.5 0.4 ‥

Notes: 1) Based on commercial and specialized banks (including trust accounts).

2) Won-denominated private placement bonds acquired by domestic banks.

3) CP transaction data of Korea Federation of Banks.

4) Combined total of KOSPI and Kosdaq markets.

5) Based on Mar 20 figures.

□ Bank lending to the household sector grew at a slower pace in March than in the previous month (+2.2 trillion won in Feb '11 → +1.7 trillion won in Mar), due to a decrease in credit loans* which more than offset the increase in mortgage lending.

* Attributable for example to payments of bonuses to civil servants. (+0.4 trillion won in Feb '11 → -0.4 trillion won in Mar).

o Despite a decline in the number of apartments to move in to, growth in mortgage lending (including loans assigned to the KHFC)

accelerated slightly (+2.2 trillion won in Feb '11 → +2.5 trillion won in Mar) － centering around individual lending, due chiefly to the start of the spring moving season and to banks'

strengthened efforts to expand loans.

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Household Loans

amount (end-Mar

Year Mar Year Mar Jan Feb Mar '11)

Household loans¹⁾ 20.1 1.9 21.8 1.9 -1.0 2.2 1.7 434.1

￭ (loans secured by

mortgages)²⁾ 25.4 2.5 20.3 1.7 0.8 1.8 2.1 289.9

[including mortgage loans

assigned to KHFC]³⁾ 35.0 3.3 28.5 2.1 1.1 2.2 2.5 ‥

￭ (other loans including

overdraft accounts) -4.5 -0.6 1.7 0.3 -1.7 0.4 -0.4 143.3 Notes: 1) Trust account lending is represented in the overall household loans category,

but not in the loan sub-category figures.

2) Including housing loans.

3) Including Bogeumjari loans and loans assigned to KHFC.

5. Monetary Aggregates

□ Year-on-year M2 growth (period-average basis, year-on-year) is estimated to have been around 4% in March, a sharp decrease from 5.0% the previous month.

o With the effects of the transfer of bank financial debentures following the spin-off of KB Kookmin Card from KB Financial Group (depository corporations → private sector) excluded, the

growth is estimated to have been at around the mid-4% level.

o This decline owed to the narrowing of the trade account surplus and to declines in securities investment by foreigners and in net government expenditures, all of which offset the increase year-on-year in bank lending.

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<Ref 1>

Deposits at Financial Institutions

(increase/decrease over period, 100 million won)

Oct '10 Nov Dec Jan '11 Feb Mar Outstanding

amount (end-Mar '11)

Bank accounts¹⁾ 137,331 -18,709 -87,187 20,969 142,832 -114,382 10,494,215

Demand deposits less uncleared checks &

bills -15,615 -2,275 41,503 20,549 21,450 -63,378 764,687

Time & savings

deposits 203,021 44,557 -70,000 25,279 129,439 41,819 7,681,880

(Time deposits) 100,423 -22,587 -93,425 36,806 102,065 92,835 4,958,647

(Instant access

accounts) 103,358 69,453 40,131 -2,918 30,402 -44,104 2,327,265

CDs + RPs + cover bills -50,475 -45,785 -44,936 -28,805 -11,831 -2,579 491,670

Bank debentures 399 -15,207 -13,754 3,946 3,773 -90,242 1,555,978

Asset Management

Companies²⁾ 745 45 -112,379 -52,122 -85,042 6,105 3,020,402

Stock investment

trusts -21,902 -11,458 -29,276 -10,228 10,623 2,668 1,012,979

Mixed-type investment

trusts 1,171 -1,046 -5,094 -2,756 5,040 -19,088 310,843

Bond investment trusts 1,872 4,952 -7,061 -23,545 -33,201 -14,519 454,423

MMFs 11,297 4,881 -89,527 -20,135 -69,672 25,596 604,971

New funds³⁾ 8,307 2,716 18,579 4,542 2,168 11,448 637,186

Money in trust funds 94,269 12,947 -26,686 64,425 1,558 12,505 886,141

(Specific money

in trust) 92,887 5,734 -62,856 62,383 142 10,152 589,667

Merchant banking

corporations 8,244 -5,336 1,142 3,166 4,931 -22,193 203,833

Bills issued 12,922 42 4,874 2,421 1,082 -12,186 162,008

CMAs -4,678 -5,378 -3,732 745 3,849 -10,007 41,825

Bills sold 16,177 11,928 -22,675 9,359 -11,965 5,781 235,675

Postal savings -6,759 -6,922 -6,319 -16,672 22,995 35,837 545,810

Deposits at securities

companies 10,194 2,414 -13,737 25,576 -15,838 9,093 155,855

Deposits at savings

banks 6,403 1,704 -1,365 -23,479 -18,680 6,715 731,873

Notes: 1) Excluding deposits from banks, the central government and non-residents.

2) Based on investment trusts and investment companies.

3) Including money invested in indirect investment funds including derivative funds.

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<Ref 2>

Corporate¹⁾ Funding and Household Loans

(increase/decrease over period, 100 million won)

Oct '10 Nov Dec Jan '11 Feb Mar Outstanding

amount (end-Mar '11) Corporate

loans²⁾ 51,274 6,695 -125,925 60,459 37,465 28,251 5,297,023

Large

corporations 19,823 18,063 -37,122 22,543 19,214 7,829 923,044

SMEs 31,451 -11,369 -88,804 37,916 18,251 20,422 4,373,979

Net issuance of corporate

bonds³⁾ 25,775 27,238 1,598 14,435 24,347 1,784 ‥

Net issuance of

CP⁴⁾ 11,903 18,634 -72,037 30,819 8,087 8,219⁶⁾ 207,789⁷⁾

Household

loans²⁾ 26,624 40,827 21,126 -9,520 21,985 17,278 4,340,677

(Loans secured

by mortgages)⁵⁾ 21,990 28,793 26,699 7,968 17,956 21,088 2,899,116

Notes: 1) Excludes financial companies. 2) Includes trust accounts.

3) Based on bonds (including P-CBOs but excluding ABSs) issued through public subscription.

4) Based on securities companies and merchant banking accounts of securities companies and banks.

5) Including housing loans, but excluding trust accounts.

6) As of Mar 1～20. 7) Outstanding amount as of Mar 20.