Frozen Securities Stocks Amid Stock Market Freeze... Only 'Meritz' Sees Spring

Major Securities Stocks Average Over 8% Drop... Meritz Soars Over 26%
Surpasses Samsung and Korea Financial to Rank 2nd in Market Cap... Enhancing Shareholder Value Through Share Buybacks

[Asia Economy Reporter Ji-hwan Park] Amid the decline in brokerage (commissioned trading) indicators due to reduced trading volume and rising market interest rates causing a simultaneous slump in securities stocks this year, Meritz Securities alone is showing a clear upward trend. While major securities stocks have fallen by an average of more than 8%, Meritz Securities has recorded a rise of over 26%. Thanks to the sharp increase in its stock price, its market capitalization ranking has also climbed from the previous 4th or 5th place to 2nd or 3rd place consecutively.

According to the Korea Exchange on the 25th, Meritz Securities' closing price on the previous day was 6,490 won, a 26% surge compared to 5,150 won at the end of last year. Its market capitalization also reached 4.4244 trillion won, ranking 2nd in market cap after Mirae Asset Securities (5.3748 trillion won). Meritz Securities' market cap had consistently stayed in the 4th or 5th place last year but on the 10th of this month, it surpassed Samsung Securities (3.8086 trillion won) with a market cap of 3.8313 trillion won for the first time, rising to 3rd place in the securities sector. On the 19th, it overtook Korea Financial Group (4.3188 trillion won) by 85.2 billion won with a market cap of 4.404 trillion won, taking the 2nd place spot. As of 9:32 a.m. that day, the market cap gap between the two securities firms had widened to 204.7 billion won.

The rise in Meritz Financial's stock price can be attributed to enhancing shareholder value through consecutive share buybacks. Meritz Securities completed share repurchases after signing trust contracts for acquiring treasury shares worth 100 billion won each in March and June last year. In November, it additionally decided on a trust contract for acquiring treasury shares worth 140 billion won.

Unlike other securities stocks that have experienced significant corrections amid external factors such as the U.S. Federal Reserve's (Fed) full-scale interest rate hikes and a sharp decline in domestic stock market trading volume, Meritz Securities' stock price has shown a steady upward trend. Since the beginning of this year, large securities firms such as Mirae Asset Securities (-2.2%), Korea Financial Group (-6.1%), Samsung Securities (-8.1%), NH Investment & Securities (-7.6%), Kiwoom Securities (-12.4%), Daishin Securities (-10.5%), Yuanta Securities (-10.0%), Kyobo Securities (-6.9%), Hyundai Motor Securities (-11.0%), and Eugene Investment & Securities (-12.1%) as well as small and medium-sized firms have all seen their stock prices decline.

Outlook for securities stocks going forward is mixed. The financial investment industry offers a positive forecast that the stock prices of securities firms, which have recently been sluggish, will recover as market indicators such as trading volume have confirmed a bottom. Hong-jae Lee, a researcher at Hana Financial Investment, said, "While brokerage indicators and market interest rates, which determine ordinary profit, had been unfavorable, recently, since the bottom in the fourth quarter of last year, the downward rigidity of these indicators has been confirmed," adding, "The gap between increased ordinary profit and stock prices is expected to narrow."

On the other hand, there are negative opinions that due to the base effect, profits will inevitably decrease this year and stock price trends will inevitably be linked to trading volume, making it difficult for a full-fledged stock price rally to emerge. According to the Korea Exchange, as of the 24th of this month, the average daily trading volume on the KOSPI was 10.6671 trillion won. This is about half compared to January (26.4778 trillion won) and February (19.0954 trillion won) of last year. The average daily trading volume on the KOSPI from March to September was around 15 trillion won, but it dropped to about 11 trillion won in the fourth quarter of last year. Hye-jin Park, a researcher at Daishin Securities, stated, "Due to the burden of last year's record-high performance, stock price trends inevitably linked to trading volume, and the unavoidable profit decline in 2022, we are downgrading our investment opinion on the securities industry from overweight to neutral."

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