As high interest rates become the new normal, the flow of money in the stock market is shifting. Investors are moving away from the post-2000s "TINA" mindset — "there is no alternative" — and embracing "TARA," or "there are rational alternatives," turning to bonds, deposits and other options outside equities.
Data from Koscom ETF Check released Thursday showed a clear trend of funds flowing into rate and bond ETFs over the past month. The KODEX Money Market Active ETF attracted 1.78 trillion won ($1.31 billion), the largest inflow of any ETF in the period. The KODEX CD Rate Active (Synthetic) drew 462.5 billion won, while the TIGER CD Rate Investment KIS (Synthetic) took in 377.1 billion won. The RISE Composite Bond (A- and above) Active and KODEX Composite Bond (AA- and above) Active ETFs received inflows of 233 billion won and 218 billion won, respectively.
The shift into rate and bond ETFs signals that investors are seeking a parking spot for stable interest income outside equities in a high-rate environment. Money market and CD rate products in particular are managed around short-duration assets, which limits price sensitivity to rate moves, making them a natural holding place for funds waiting for a clearer direction in the stock market.
Investor deposits have fallen from a year-to-date peak in the 130 trillion won range to around 100 trillion won, but underlying demand for equity exposure has not dried up. The figure still exceeds the roughly 90 trillion won level seen at the start of the year, and no clear downtrend has emerged since August. Margin balances have also been recovering since the market correction in July.
Even as a wait-and-see mood persists in the stock market amid high rates, analysts expect investment to concentrate further in AI-related sectors. "Investor deposits and margin financing balances have been recovering since the sharp drop in July," said Yun Won-tae, a researcher at SK Securities. "Despite high interest rates, expectations for a stock market rally remain alive, but an economic slowdown outside the AI sector is deepening, and concentration will intensify."
Markets are watching not only AI demand itself, but also how long hyperscalers — Google, Amazon, Microsoft and Meta — can sustain their massive capital outlays.
Industry sources say the investment burden on hyperscalers has already grown beyond what their own cash flows can comfortably cover. According to SK Securities, hyperscaler capital expenditure is expected to exceed $1 trillion in 2027, while combined free cash flow is estimated at negative $93 billion. The shortfall will need to be financed externally, and higher borrowing costs mean a heavier interest burden and a longer payback period on those investments.
When AI-related companies report third-quarter earnings, investors should therefore focus not only on the scale of investment but on whether those companies can actually sustain it. "Hyperscalers' current borrowing rates are in the 5 to 7 percent range — if that rises to 10 percent, the investment payback period could be pushed back by about a year," Yun said. "You need to look at cash flow and financing capacity alongside the size of the investment."
kacew@heraldcorp.com
