As KOSPI continues its early-year rally and expectations build for hitting "Ocheonpi (KOSPI 5000)," securities stocks are broadly strong. With forecasts piling up for robust earnings at securities firms on a surge in transaction value driven by the rising index, buying by investors hoping for better results is pouring in.
According to the Korea Exchange (KRX) on the 21st, Mirae Asset Securities jumped 31.48% this year to date (Jan. 2–20), the steepest gain among domestic securities stocks. It was followed by Shinyoung Securities (18.57%), Bookook Securities (15.54%), SK Securities (12.75%), and Kiwoom Securities (10.71%). The KRX securities index rose 14.82% over the same period.
The across-the-board strength in securities stocks reflects expectations for earnings on the back of a buoyant market. The KOSPI index, which was 4,214.17 points at the end of last year, closed at 4,885.75 points on the day, up 15.94% over 13 trading days. In intraday trading, it briefly spiked to 4,935.48 points, putting the 5,000-point milestone within sight.
Mirae Asset Securities' solo run stands out in particular. Hopes tied to gains from its SpaceX investment and expansion of its digital asset business through the acquisition of Korbit have lifted the share price. When a market boom triggers an explosion in transaction value, brokerage revenue at securities firms is bound to rise directly. Yuanta Securities Korea projected that combined controlling shareholders' net profit at domestic securities firms would reach 1.46 trillion won in the fourth quarter of last year.
Woo Do-hyung, an analyst at Yuanta Securities Korea, said, "A rise in transaction value due to the market upswing is expected to deliver solid brokerage profit and loss, and in trading, gains from overseas investment and equity operations will offset bond valuation losses from higher interest rates."
Considering the government's intent to reach KOSPI 5000 and the uptrend in semiconductors, he estimated average daily transaction value this year and next at 28.8 trillion won and 30.3 trillion won, respectively.
Target prices for securities stocks are also climbing one after another. The brokerage consensus (average forecast) target price for Mirae Asset Securities rose about 30% to 30,633 won from 23,545 won three months ago, and most securities firms saw target prices raised, including Samsung Securities (from 902,140 to 1,017,500 won), Kiwoom Securities (from 2,894,670 to 3,823,333 won), and NH Investment & Securities (from 23,507 to 25,971 won).
Ahn Young-jun, an analyst at Kiwoom Securities, said, "Buoyed by a booming market, both domestic and overseas transaction value hit an all-time high in the fourth quarter of last year," adding, "Following last year, this year will also see increasing transaction value and continued strong results for the brokerage-based securities sector."
However, a sharp rise in market interest rates is a risk factor. Typically, higher market rates lead to weaker operating results at securities firms due to falling bond prices. In the fourth quarter of last year, yields on 3-year and 10-year Treasury bonds rose 37 basis points (1 bp = 0.01 percentage point) and 44 basis points from the previous quarter, respectively. In January this year, they increased by 24 basis points and 27 basis points, from 2.95% to 3.19% and from 3.38% to 3.65%, respectively.
Ahn said, "Given the base rate, an additional steep rise in market rates is likely to be limited," adding, "Deterioration in results due to weak operating profit and loss is likely a one-off factor."