Securities Stocks Soar and Insurance Stocks Also Rise

Stock Prices of Securities Firms Rise Over 50% on Average Since End of March
Expectations for Increased Operating Profit in Q1 Next Year

Insurance Stocks Like Samsung, Hanwha, and Dongyang Also Stretching
Highlighted as Beneficiaries of Next Year's Interest Rate Hikes

[Asia Economy Reporters Oh Ju-yeon, Park Ji-hwan] Securities and insurance stocks, which have seen a sharp increase in stock prices since the fourth quarter of this year, are expected to continue their upward trend next year based on solid earnings. Securities firms are expected to see their fourth-quarter earnings increase by more than 20% compared to the same period last year, with first-quarter earnings next year projected to double. Insurance companies are also forecasted to see a 5% increase in net profit next year. In particular, the insurance industry is gaining optimism that the stock price growth rate, which lagged behind the KOSPI this year, could be recovered due to interest rate hikes next year.

◇Securities stocks with an average 50% return this year, earnings expectations remain valid for next year= Thanks to the surge in individual participation in the stock market this year and the index rise following the COVID-19 pandemic, securities stocks have seen significant price increases, and this trend is expected to continue next year.

According to the Korea Exchange on the 16th, securities stocks have risen by an average of more than 50% compared to the end of March this year. Kiwoom Securities, which has a high proportion of individual investors, saw its stock price rise by 90%, while Samsung Securities (44%), Mirae Asset Daewoo (89%), and NH Investment & Securities (35%) also recorded stock price gains. Although fees from the IB division and trading (asset management) profits decreased due to difficulties in face-to-face sales this year, brokerage fee income increased significantly due to the rise in direct individual investments. The average daily trading volume for the year is expected to reach a record high of 22 trillion won. Even with a conservative estimate of next year’s average daily trading volume, the normalization of IB and trading divisions is expected to result in strong earnings for securities firms next year.

According to FnGuide, the operating profit of five securities firms (NH Investment & Securities, Samsung Securities, Kiwoom Securities, Mirae Asset Daewoo, Korea Financial Group) in the fourth quarter of this year is expected to be 1.0927 trillion won, a 25.70% increase from 869.3 billion won in the same period last year. In the first quarter of next year, all are expected to see profit increases compared to the previous year, rising from 224.8 billion won to over 830 billion won, more than 3.5 times. This is due to Korea Financial Group turning from an operating loss to profit, and Kiwoom Securities and Samsung Securities’ operating profits estimated to increase by 1600% and 750%, respectively.

Seung-geon Kang, a researcher at KB Securities, said, "The proportion of trading by individual investors with high turnover has increased, and the strengthened tax law criteria for major shareholders (subject to capital gains tax) have been withdrawn," adding, "On the other hand, real estate investment regulations continue, so the inflow of funds into the stock market is unlikely to change."

◇Life insurance stocks benefiting from rising market interest rates= As market interest rates continue to rebound, the life insurance sector is emerging as a beneficiary. Life insurers hold a large amount of long-term bond assets, so rising interest rates are likely to increase profits.

Stocks of life insurers such as Samsung Life Insurance, Hanwha Life Insurance, Tongyang Life Insurance, and Mirae Asset Life Insurance have recently been gaining momentum. On the previous day, Hanwha Life Insurance closed at 2,560 won, up 2.20% from the previous trading day. Since November, its stock price has surged by 64.1%. During the same period, Samsung Life Insurance (15.9%), Tongyang Life Insurance (14.8%), and Mirae Asset Life Insurance (4.2%) also showed strong gains. Hanwha Life’s particularly strong rise is attributed to its product lineup having the highest interest rate sensitivity in the industry, expected to benefit the most from improved profitability and soundness with rising interest rates.

Currently, countries worldwide are maintaining large-scale expansionary fiscal spending to overcome the impact of COVID-19, which exerts upward pressure on government bond and market interest rates. In Korea, the 10-year government bond yield, which hit a historic low of 1.373% at the end of June this year, has risen to 1.67% this month. Life insurers have bond holdings exceeding 60% of their assets under management. Due to the high proportion of interest-bearing assets (bonds and loan assets), rising interest rates increase the yield on managed assets, boosting investment income and reducing the burden of additional reserves for variable annuity guarantees, making them the most representative beneficiaries.

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