Securities Stocks with Shrinking Trading Value... "Approach Stocks with High Dividend and Earnings Appeal"

Average Daily Trading Value Indicator at 20.8 Trillion KRW
Decline Compared to 26.8 Trillion KRW in First Half of This Year

Major Securities Firms' Net Profit in Q1 Next Year Expected at 1.255 Trillion KRW
About 27% Decrease Compared to Q1 This Year Anticipated

[Asia Economy Reporter Minji Lee] There is a forecast that the investment attractiveness of securities stocks will decline for the time being due to a decrease in commission revenue caused by reduced stock trading by individual investors. However, advice has also been given that approaching stocks with high dividend appeal and stable performance in other business sectors remains valid.

According to the Korea Financial Investment Association on the 24th, the trading value of individual investors in the KOSPI market on the previous day was 12.9455 trillion KRW, which is about 25% lower compared to one year ago (16.8866 trillion KRW). Looking at the domestic stock daily average trading value indicator, it was 22.9 trillion KRW last year, 26.8 trillion KRW in the first half of this year, 26.2 trillion KRW in the third quarter, and currently remains at around 20.8 trillion KRW. Major indicators also show a slowdown. Investor deposits have maintained around 65 trillion KRW since the beginning of this month, slightly down from 68-70 trillion KRW at the start of the year, and margin loans stood at the 23 trillion KRW level, showing a decline compared to the peak of 25 trillion KRW recorded in September.

Accordingly, the profit scale of securities firms that enjoyed a boom due to a sharp increase in brokerage revenue is expected to shrink compared to before. The combined net profit of major securities firms (Mirae Asset Securities, Korea Financial Group, Samsung Securities, Kiwoom Securities, Meritz Securities, NH Investment & Securities) for the first quarter of next year is forecasted to decrease by about 27% to 1.255 trillion KRW compared to the first quarter of this year. Kyunghoe Koo, a researcher at SK Securities, explained, “Due to the declining trend in trading value, there is no short-term factor that can drive stock prices up, and securities firms with high dependence on real estate finance due to rising interest rates will become less attractive,” adding, “Brokerage business contraction will reduce securities firms’ profits.”

Looking at the trend of securities stocks over the past two months, the KRX Securities Index has fallen by about 5.41%, showing a level similar to the KOSPI decline rate (6%). Securities experts say that since securities stocks may show weak stock price trends in the short term, selective approaches are needed toward stocks with high dividend appeal or those expected to show clear performance improvements in other business sectors.

In the case of Samsung Securities, balanced growth is expected in the Wealth Management (WM) and Investment Banking (IB) divisions, and it is evaluated to have the highest dividend appeal of over 6% among large securities firms. Positive outlooks are also emerging for Korea Financial Group, which has a larger proportion of the IB division compared to other securities firms. Junseop Jung, a researcher at NH Investment & Securities, analyzed, “Strong performance is expected from affiliates outside the securities firms, and the expected price-to-earnings ratio (PER) for next year is 4.7 times, undervalued compared to other securities firms (6 times).”

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