Securities stocks, which had extended a rally on the back of a surge in the domestic stock market and an explosion in transaction value, have recently turned weaker. After steadily climbing since the start of the year, securities stocks have struggled to recover their prior prices since the outbreak of the U.S.-Iran war.
On the supply-demand side, foreign investors' "change of heart" stands out. To take profits, foreign investors are trimming their exposure to securities stocks and shifting their portfolios to war beneficiaries or leading stocks with high earnings visibility.
In the market, securities firms are being urged to prioritize strengthening retail competitiveness beyond simple brokerage and securing financial soundness through thorough management of risky assets in order to regain strong investment appeal.
According to the Korea Exchange (KRX) on the 16th, the "KRX Securities Index" has risen about 69% from 1,567 to 2,650 from the start of the year to now (Jan. 2–Mar. 13). The index jumped especially around Feb. 25, when the third Commercial Act amendment bill passed the National Assembly's plenary session.
However, after the KOSPI index plunged due to the U.S.-Iran war, securities stocks have not recovered to prior levels. The KRX Securities Index fell 7.47% on the 3rd of this month, right after the Middle East war broke out. It tumbled 14.03% on the 4th.
Mirae Asset Securities, which had extended a rally on aggressive shareholder return policies such as canceling treasury shares, also could not avoid the downturn. Mirae Asset Securities' share price, which was 71,689 won on the 27th of last month, slid to 66,312 won on the 3rd. The decline over this period is about 7.5%.
SK Securities, whose share price had more than tripled from the start of the year, also has not recovered to prior levels after the sharp drop on the 3rd. SK Securities' share price surged from 644 won at the start of the year to 2,125 won on the 27th of last month, showing its strength, but it plunged 14.35% and 18.41% on the 3rd and 4th, respectively, giving back much of the gains in two days. It has since managed a slight rebound but is now moving sideways in the 1,700–1,800 won range.
Foreign investors are also hesitant to return to securities stocks after taking profits. As the benefits of the value-up drive were priced in starting last year and securities stocks rose, foreigners moved to lock in gains.
From the start of the year to this month, foreign investors were net sellers of 167.2 billion won of Korea Investment Holdings, 200.4 billion won of Mirae Asset Securities, 137.6 billion won of NH Investment & Securities, and 14.3 billion won of Samsung Securities. They also posted net selling over this period for 11 other stocks included in the KRX Securities Index.
Kim Yong-jin, a professor in the business administration department at Sogang University, said, "Securities do better when the market improves, but they have already risen a lot, and foreigners likely moved to semiconductors, bio, or robots after taking profits."
Experts say the investment appeal of securities stocks remains intact. With market volatility expanding, record results are continuing, including average daily transaction value exceeding 100 trillion won.
A researcher at a securities firm said, "Greater market volatility paradoxically leads to an increase in transaction value, which is positive for securities companies in terms of fee revenue (commission from brokerage)," adding, "The recent steep correction is rather an opportunity to respond with a partitioning buy strategy."
Some argue that strengthening internal competitiveness is more urgent than the external growth of securities firms. The analysis is that to regain the market's trust, they must prove their internal capabilities by not only defending retail market share but also managing risky assets such as real estate project financing (PF).
Currently, among small and mid-sized securities firms, the share of real estate PF and bridge loans has increased. As of September last year, Daishin Securities' real estate finance amounted to 87% of its equity capital and Meritz Securities' to 133%, more than two to three times the industry average of 39%.
Kim Ye-il, a researcher at Korea Ratings, noted, "When a securities company is designated as an investment bank (IB), its business scope expands to maximize leverage using capital," adding, "In this process, the external quantitative size may grow, but what truly matters is the risk management capability to handle it."