Ahead of the Chuseok holidays, many Koreans expect cash, with companies offering bonuses to motivate employees and relatives exchanging money as gifts in the family reunion rituals.
This year, the three-day Chuseok holiday that kicks off Wednesday for three days is coming amid the COVID-19 outbreak, and the prolonged pandemic appears to be influencing ways to save or invest the holiday pocket money. But what to do with cash in times of ultralow interest is a big question.
Some financial consumers are becoming “interest rate nomads,” frequently changing banks to open savings accounts that offer higher interest rates.
The trend has come about as commercial banks have slashed their yields on savings and checking accounts to near zero, in line with the Bank of Korea’s rate cut to a record low of 0.5 percent in May, aimed at helping the local economy shake off the coronavirus gloom.
“Even savings banks lowered their deposit rates due to the central bank’s ultralow-rate policy. I was waiting for special savings opportunities offering higher rates that local lenders usually launch ahead of the Chuseok holiday in order to store the money I had saved and holiday bonus payments,” said Jo Jae-won, a 30-year-old office worker living in Seoul who frequently searches online for high-interest banking products.
Earlier this week, local savings banks, including SBI Savings Bank and OK Savings Banks, raised their interest on time deposits by as much as 0.2 percentage point in an effort to secure cash flow during the Chuseok holidays, exciting interest rate nomads, industry sources said.
The much-feared second wave of the COVID-19 outbreak has pushed some financial consumers to “penny-wise finance,” amid fears of a deepening economic slump, whereby people either save or earn small sums of money through various channels.
The mobile version of a piggy bank operated by Kakao Bank, an internet-only bank subsidiary of Kakao, saw an increase in the number of subscriptions one week before Chuseok. Branded as Coin Box, the savings product automatically collects and saves small change under 1,000 (86 cents) in Kakao Bank users’ deposit and savings accounts.
“As of Thursday, the cumulative number of piggy bank accounts came to 2.71 million, which gained more than 14,000 from the previous week,” a Kakao Bank official said.
Chuseok gift sets are traded at Carrot Market, an online secondhand market in South Korea. (The Korea Herald)
For some, reselling of holiday packages has become a way to make a little extra money. Gift sets primarily from employers, including of Korean traditional sweets, red ginseng and canned ham, are continually updated at online flea markets like Junggonara and Carrot Market.
Meanwhile, the stock trading fever boosted by the COVID-19 pandemic will likely continue to gain steam during the holiday season, especially surrounding the “Seohak Ants,” a term referring to Korea’s retail investors who invest in foreign stock markets for higher returns.
“The average trading volume of foreign stocks during the two biggest Korean holidays -- Seollal, or the Lunar New Year, and Chuseok -- rose by nearly 30 percent each year since 2017, partly due to short-term cash inflow during holiday periods,” said an official at Shinhan Investment Corp.
Amid the ongoing low-rate environment, individual traders are increasingly turning their eyes from savings to overseas tech stocks, buoyed by the contactless movement to combat the COVID-19 outbreak, he added.
Responding to the Seohak Ants movement, major local brokerages, including Samsung Securities, Shinhan Investment, Korea Investment & Securities and Mirae Asset Daewoo, are slated to operate their international stock trading services 24 hours throughout the three-day Chuseok holiday.
“While the Korean securities markets stay closed during the Chuseok holiday, overseas bourse operators are in full swing for stock trading,” a Samsung Securities official said.
To help local investors with foreign stock investment, Samsung Securities is set to hold a web conference on promising stocks as well as analysts’ outlook for particular sectors and industries via its YouTube channel.
By Choi Jae-hee (firstname.lastname@example.org