With volatility rising in South Korea's stock market, short-term notes issued by brokerages have drawn attention as a way to park idle cash in exchange for a fixed rate over a set period. Offerings now range from special deals yielding 5% to products allowing free deposits and withdrawals, as well as installment plans for monthly contributions. Investors should examine maturities and eligibility terms, not just the headline rate.
Korea Investment & Securities is selling one-year notes at 5.0% on a first-come, first-served basis through the end of October, according to the financial investment industry on the 16th. The offer applies to Bankis customers trading for the first time this year or clients depositing new funds. Six-month notes under the same terms carry a rate of 4.7%. Existing account holders who do not meet those conditions receive 4.4% on one-year notes and 4.1% on six-month notes.
Kiwoom Securities launched a three-month "Hangul Love" special note at 5.8% on Oct. 8. The total sales limit is 10 billion won, with a cap of 1 million won per person. Because 5.8% is an annualized rate, the actual pretax interest on 1 million won held for three months comes to about 14,500 won. Since the notes are sold on a first-come, first-served basis, investors should check remaining availability.
Samsung Securities began selling an additional 100 billion won worth of one-year notes at 4.3% starting Oct. 12. Customers with a comprehensive account can invest between 1 million won and 300 million won, and sales end once the limit is reached. An installment plan requiring fixed monthly payments pays 4.6%. The open-ended product and a newly introduced cash management account tied to the notes pay 2.55%. The CMA version automatically buys and sells the notes as money moves in and out.
Standard fixed-term products outside the special offers are also worth comparing. Shinhan Securities posted 4.05% on 365-day notes as of Sept. 17, while Hana Securities quoted 4.0% on notes maturing in 271 to 365 days as of Sept. 7. NH Investment & Securities offered 3.95% on one-year notes as of Sept. 28, and KB Securities the same rate on 360-day notes as of Sept. 22. Mirae Asset Securities applied 3.85% to its one-year product starting Aug. 31. All figures are pretax rates, and the yield applied depends on when an investor signs up.
These notes are financial products with maturities of up to one year, issued by brokerages on their own credit. Outstanding issuance totaled 55.93 trillion won at the end of June, up 9.1% from the end of last year, according to the Korea Financial Investment Association. Samsung Securities and Meritz Securities received new licenses in September, and intensifying competition among brokerages for customers has widened the range of options available to investors.
The main appeal is that investors who hold the notes to maturity receive the yield set at the time of purchase. That makes them usable for money waiting on the sidelines when the direction of stock prices is hard to gauge. For cash needed to buy shares in the near term or to cover living expenses, however, the open-ended version is more suitable. Those with no spending plans for six months to a year may consider fixed-term products, which carry relatively higher rates. Because installment plans spread payments over several months, the actual interest earned differs from lump-sum products.
Unlike bank deposits, these notes are not covered by deposit insurance. If the issuing brokerage defaults or goes bankrupt, investors can lose principal. Fixed-term products terminated before maturity are subject to an early redemption yield lower than the contracted rate. An industry official said investors can use the notes as a stable asset management tool that is not swayed by market conditions.