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| Seoul's financial district of Yeouido where the headquarters of most securities firms are located / Yonhap |
By Lee Min-hyung
The real estate assets of securities firms here have plunged in value over the past year amid continued market uncertainties caused by a hawkish cycle of rate hikes, data showed.
According to data compiled by the Korea Financial Investment Association (KOFIA), the property assets of seven securities firms out of the top 10 lost value as of the end of the first quarter, from a year earlier. They include top-ranking brokerage houses ― such as Mirae Asset Securities, Meritz Securities and Korea Investment & Securities.
Shinhan Securities topped the list in terms of the decline in property investment value. The company invested in real estate worth 94.9 billion won ($73.47 million) as of the end of March 2022, but the value fell by more than 80 percent down to 12.6 billion the following year, following the sale of its headquarters on Yeouido in Seoul.
Other brokerages faced a similar situation after the real estate market entered a clear path of downturn last year following a consecutive set of key rate hikes by the U.S. Federal Reserve and the Bank of Korea.
The figure for KB Securities also dropped 15 percent to 14.6 billion won during the same period. Korea Investment & Securities was also hit harder by the market doldrums with a drop of 29 percent.
But some others ― such as NH Investment & Securities and Kiwoom Securities ― achieved slight gains in their investment properties over the same period.
Securities firms are also faced with lingering risks associated with real estate project financing. According to data from the Financial Supervisory Service (FSS), securities firms' delinquency rate in real estate project financing has been on a significant rise over the past few years. The figure came in at 3.7 percent as of the end of 2021 but soared to 8.2 percent in the third quarter of 2022.
Industry sources expected the commercial real estate market to remain in the doldrums until the economy bounces back.
"The overall property market will likely continue facing downturn from a near-term viewpoint, and brokerage houses have no other choice but to maintain their risk management capability amid the pessimistic macroeconomic circumstances," an official from the financial industry here said.
Investor sentiment on securities stocks is also weakening, data showed. According to the Korea Exchange (KRX), the combined market capitalization of the KRX Securities Index reached 19.4 trillion won on June 20, a decline of around 190 billion won from the final trading day of last week.
Securities firms are also grappling with the aftermath of continuous financial fiascos sparked by sales of some risky derivatives ― causing an abrupt fall in the share prices of some listed shares. Some brokerages face investigation.
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