There was an outlook that domestic stock market transaction value could likely decline due to tighter rules on single-stock leveraged exchange-traded funds (ETFs). With market volatility rising, investor deposits and margin loan balances are also shrinking, which could be a short-term burden for the securities sector.
On the 4th, Jang Young-im, an SK Securities researcher, said in a report, "With the tightening of rules on single-stock leveraged ETFs, the share of ETFs contributing to total transaction value is highly likely to narrow starting in Aug.," adding, "Risk-off sentiment from market volatility is also a short-term burden."
The average daily transaction value in the domestic stock market last month was 99.5 trillion won, down 27.6% from 137.5 trillion won in the previous month. By market, it was 43 trillion won for the Korea Exchange (KRX), 23.3 trillion won for NEXTRADE (NXT), and 33.3 trillion won for ETFs.
Although it was lower than the second quarter's average daily transaction value of 118.1 trillion won, it remained above the first quarter's 84.8 trillion won. In particular, the average daily ETF transaction value rose from 17.8 trillion won in the first quarter and 28 trillion won in the second quarter to 33.3 trillion won last month, partly cushioning the decline in total transaction value.
What drove the increase in ETF transactions were single-stock leveraged products using Samsung Electronics and SK hynix as underlying assets. Last month, the transaction value of single-stock leveraged ETFs totaled 261 trillion won, accounting for 36% of total ETF transaction value.
However, as supplementary measures such as raising the base deposit took effect from the 31st on, transaction size fell rapidly. On the effective date, the average turnover of single-stock leveraged ETFs was 52.5%, well below the previous average of 160%. Transaction value was 3.2 trillion won, down 73% from the prior average of 11.7 trillion won.
On the premise that not enough post-implementation data have accumulated, SK Securities estimated that if the decline at that time is applied to last month's ETF transaction value, total ETF transaction value could shrink by about 25%. On an average daily transaction value basis, that implies a decrease of about 8.5 trillion won.
As market volatility increases, investors' risk appetite is also declining. Investor deposits last month were 109.7 trillion won, down 15.5% from the previous month. Although they fell sharply from the 130 trillion won range in May–June, they still exceed 100 trillion won.
Margin loan balances also fell 8.4% from the previous month to 34.5 trillion won at the end of last month. Researcher Jang explained, "The fact that both investor deposits and margin loan balances are declining from the previous month means investor sentiment is contracting amid expanding market volatility."
However, the investment opinion on the securities sector was maintained at "overweight." This is because the absolute scale of average daily transaction value remains solid, and recent share price corrections have pushed the average price-to-book ratio (PBR) of securities firms down to around 0.9 times, enhancing valuation appeal.
Even considering the possibility of slower earnings in the second half, annual profits at securities firms are expected to hit record highs. With the recent share price decline, the average dividend yield of major securities firms has also risen to 6.0%.
Jang said, "In the current phase of high volatility, it is worth focusing on securities firms' dividend appeal," adding, "If approached from a dividend perspective, high-yield preferred shares such as Korea Investment Holdings preferred (KIH(1P)) and NH Investment & Securities preferred (NHIS(1P)) can be alternatives."