Since the start of the year, Korea's stock market has been breaking record highs day after day, and securities shares are also extending gains. As the liquidity rally continues and expectations build for benefits from the government's push to amend the Commercial Act, investor sentiment toward securities stocks has heated up significantly.
According to the Korea Exchange (KRX) on the 20th, the KRX securities index as of the previous day surged 95.49% from early this year (Jan. 2), the highest increase among all indexes. That is almost twice the level of the No. 2 KRX semiconductor index (49.21%).
By individual stock, Mirae Asset Securities (201.9%), SK Securities (145.5%), Korea Investment Holdings (75.32%), NH Investment & Securities (71.17%), Kiwoom Securities (68.39%), Daishin Securities (68.1%), and Samsung Securities (47.8%) posted sharp gains.
Securities companies are prime beneficiaries of a bull market. That is because fee revenue increases as transactions of investment products such as stocks, derivatives, and exchange-traded funds (ETFs) grow.
Recently, the stock market has seen transaction value rise rapidly thanks to strength in key industries such as semiconductors and government policies to bolster the market. Samsung Electronics and SK hynix, touting their upper hand in price negotiations, posted steep gains in operating profit, and expectations for the ruling party's third Commercial Act amendment are also boosting investor sentiment toward securities stocks with high treasury share ratios.
In fact, the average investor deposit balance this month (Feb. 2–13) was 102.592 trillion won, up 9% from the average of 94.0536 trillion won last month (Jan. 2–29). Investor deposits surpassed a record high of 82.0148 trillion won in November last year, dipped slightly to 81.9355 trillion won in December, and are rising again.
Margin loans for leveraged investing are also hitting record highs. The average credit transaction loan in February was 31.1263 trillion won, up from 27.2206 trillion won in December and 28.7801 trillion won in January.
Kim Jae-woo, an analyst at Samsung Securities, said, "Market indicators are showing unprecedented strength, with investor deposits topping 100 trillion won and average daily transaction value exceeding 60 trillion won," adding, "As a result, the valuation of the securities sector is entering a new range."
Still, the surge in share prices brings pressure from lofty levels. Mirae Asset Securities has a target price of 50,000–70,000 won, while the current share price is 70,500 won. Korea Investment Holdings has a target price of 200,000–350,000 won, with the current share price of 283,500 won approaching the upper end.
Experts say that as long as Korea's stock market keeps rising, the momentum in securities shares remains intact, but advise a staggered buying strategy during pullbacks. A researcher covering the securities sector said, "The KOSPI's rally is already strong, but if the growth driver carries over to KOSDAQ, the uptrend in the securities sector can hold," adding, "A buy-on-dips strategy is valid."
There is also advice to focus on undervalued names. Kim noted, "Companies with high sector valuations such as Mirae Asset Securities and Kiwoom Securities have entered a new range, with price-to-book ratios (PBR) approaching 2 times," adding, "Given that lower-tier names by valuation are still below 1.5 times PBR, it is valid to focus on low-PBR securities stocks."