[Donghak Ant One Month] Concerns Over Securities Firms' Earnings?... Partial Defense Through 'Brokerage'

New Account Openings Continue to Break Records Since January

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[Asia Economy Reporter Kum Boryeong] Although securities firms are expected to experience poor performance due to the impact of the novel coronavirus infection (COVID-19), it is analyzed that the brokerage sector will partially defend against this.

According to Kyobo Securities on the 21st, the estimated net profit for the first quarter of this year for Mirae Asset Daewoo, NH Investment & Securities, Korea Financial Group, Samsung Securities, Meritz Securities, and Kiwoom Securities is approximately 402.2 billion KRW. This represents a 46.9% decrease compared to the previous quarter and a 60.5% decrease compared to the same period last year.

The expected decline in net profit for securities firms appears to be due to evaluation losses on proprietary trading-related assets caused by the sharp rise in interest rates in March due to COVID-19. Additionally, profits related to investment banking (IB) deals such as initial public offerings (IPO) are expected to decrease due to suspension and delays. Furthermore, due to increased volatility in the bond and stock markets, operational losses related to equity-linked securities (ELS) are also estimated.

Reflecting this, the securities industry index fell 21.6% from 1718.52 at the beginning of the year to 1347.30 on the 17th. This decline is greater than the 11.98% drop in the KOSPI index from 2175.17 to 1914.53 during the same period.

However, due to the so-called 'Donghak Ant Movement,' individual investments surged, and the average daily trading value in the first quarter increased by about 50% to 14.8 trillion KRW compared to the previous quarter, indicating that brokerage revenue is expected to remain robust. The brokerage sector thus plays a role in partially offsetting concerns about first-quarter earnings.

Since January, new account openings have continuously set records. This is because new funds flowed in, viewing the stock price decline due to COVID-19 as an investment opportunity. Researcher Jung Gilwon of Mirae Asset Daewoo explained, "Some securities firms are estimated to have seen a 4 to 5 times increase compared to the average daily new accounts last year," adding, "Other securities firms are in similar situations." As of the 13th of this month, the average daily trading value rose to 22.2 trillion KRW, and brokerage revenue is expected to continue for the time being.

If this trend continues, Kiwoom Securities is expected to benefit the most from brokerage gains among securities firms. Researcher Lim Heeyeon of Shinhan Financial Investment said, "If the upward trend in average daily trading value continues as it is, it will break records again following the first quarter. It is also encouraging that credit balances hit bottom in March and are continuing to recover," adding, "The strong performance of traditional businesses such as commissions and interest income is expected to be the main factor in Kiwoom Securities' second-quarter earnings. This is a stock that must be held as long as the Donghak Ant Movement continues."

This content was produced with the assistance of AI translation services.