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| Korea's financial district on Yeouido in Seoul / gettyimagesbank |
By Lee Min-hyung
Securities stocks here are extending dismal performances. This is happening despite clear signs of a rebound in the local stock market, as investor sentiment has yet to recover due to weak earnings outlooks of brokerage houses and financial uncertainties overseas sparked by the sequential collapse of major financial institutions in the U.S. and Europe, analysts said.
Financial markets here and abroad tumbled early last month, hit by growing investor concerns following the sudden collapse of Silicon Valley Bank and Credit Suisse. But starting from mid-March, the benchmark KOSPI shifted to a solid recovery path fueled by hopes of the U.S. Federal Reserve taking a less hawkish stance.
Despite the unexpected rally of the main bourse, major securities stocks failed to jump on the path for a rebound last month, data showed. The Korea Exchange (KRX) Securities Index fell by 7.95 percent in March, while the KOSPI increased by 2.65 percent and the secondary Kosdaq also attained bigger growth of 7.06 percent during the same period.
The KRX Securities Index consists of 10 major brokerage houses here such as Mirae Asset Securities and Meritz Securities.
The disappointing stock performance contrasts with robust momentum for a rally in the stock markets here. The daily average transaction volume reached 21.7 trillion won ($16.5 billion) in the main and secondary stock markets combined. The figure is on the gradual rise this year after reaching 13.1 trillion won in January. The first-quarter average figure is 17.5 trillion won, up 35 percent from the fourth quarter of 2022.
Market analysts expected securities firms here to achieve earnings recovery in the first half of this year on expanded brokerage commission revenues driven by the overall market rebound.
"The market's key indices have shown signs of rebound, particularly since March, so brokerage houses are forecast to achieve earnings recovery," eBest Investment & Securities analyst Jun Bae-seung said.
But the analyst also warned of the lingering risk on their real estate project financing (PF) businesses.
"Their real liquidity growth rate displays negative numbers, and uncertainties remain in place over the real estate PF, so concerns over the overall securities industry have yet to be cleared away," he said. "But the market condition appears to have bottomed out amid a likelihood for a monetary policy shift."
Park Hye-jin, another analyst at Daishin Securities, said securities firms' earnings would not be as satisfactory as investors expected in the first quarter, but they will report gradual earnings recovery as the year-end approaches.
"The worst is passing regarding the market circumstance in the securities industry," the analyst said. "The rate hike cycle nears the end, and the market interest rate is showing signs of stabilization. Chances are securities firms' net profit in the second half of 2023 outperforms that of last year."
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