Capital Research Institute "This Year's Securities Industry Keyword is SNAKE... Prepare for Trump 2.0"

The Capital Market Research Institute, a think tank for the capital market, presented 'SNAKE' as the key issue keywords for the securities industry this year. These include financial policy changes following the inauguration of the Donald Trump administration (S·Shifting policy), a new environment (N·New environment), artificial intelligence (A·AI), value-up policies (K·Korea Value-up), and ESG (E). In particular, it was pointed out that appropriate response strategies are needed due to uncertain financial market conditions and policy changes in Trump's second term.

On the afternoon of the 22nd, Lee Seok-hoon, head of the Financial Industry Office at the Capital Market Research Institute, stated at the ‘2025 Capital Market Outlook and Key Issues’ seminar held at the Yeouido Financial Investment Center, "The securities industry in 2025 is expected to see improved profits centered on brokerage, investment banking, and asset management sectors, supported by stock market improvements."

By business sector, improvements are especially expected this year in the stock market, initial public offerings (IPO), and mergers and acquisitions (M&A). Lee said, "The scale of public offerings could expand depending on whether large corporations preparing for IPOs this year go public," adding, "The domestic M&A market also has factors that activate the market, such as a favorable interest rate environment for valuations and an increase in hostile M&As. The easing of M&A reviews in Trump's second term is also expected to contribute to the activation of the global M&A market." However, he added that profit volatility will also be observed due to the contraction of equity-linked securities (ELS), project financing (PF) defaults, and unstable financial markets.

The first issue for the securities industry this year is expected to be ‘policy changes,’ such as the easing of various financial regulations including the Volcker Rule, following the inauguration of the Trump administration’s second term. Lee said, "Trump will pursue a deglobalization policy focused on strengthening the global competitiveness of domestic financial firms," and anticipated ▲the easing of the Volcker Rule regulating banks' own capital investments, ▲delays in the introduction of Basel III final regulations, and ▲the abolition of stress tests. Additionally, he expected the simplification of financial industry M&A reviews and active promotion of virtual assets. He noted, "This can be expected to activate the financial industry through increased financial policy liquidity, expanded investment opportunities, and development of the virtual asset market," but also warned, "Financial system risks may rise contrary to recent global capital regulation system trends."

The second issue is the 'new environment' faced by securities firms as brokerage businesses change due to the expansion of individual investors' overseas stock investments. Lee said, "With the decline in expected returns on domestic stocks and increased interest in overseas stock investments, individual customers' overseas investments are expected to diversify," and suggested, "Securities firms need to establish services and sales strategies related to overseas brokerage and financial investment products." Interest rate uncertainty and high exchange rates are also areas to watch. In the bond market, increased interest rate volatility and widening credit spreads due to rising default risks are expected. In the foreign exchange market, the won-to-dollar exchange rate continues to show high volatility, raising concerns about margin calls related to over-the-counter derivatives. Lee recommended, "Strengthening risk management in the trading sector based on movements and scenario forecasts of interest rate and foreign exchange indicators is necessary."

The third issue is the introduction of 'AI' regulations and industry response directions. Lee emphasized that a regulatory system for generative AI development and utilization is being established domestically, mentioning the passage of the Basic Artificial Intelligence Act by the National Assembly at the end of last year. He said, "Advancing financial investment tasks using AI technology and improving cost efficiency will be competitiveness strategies for securities firms," and added, "It is necessary to expand not only AI talent recruitment and training but also technology investment." Along with this, as the fourth issue, he mentioned the domestic 'Value-up' program, stating, "With the growth of Value-up and the M&A market, strengthening corporate finance based on corporate advisory and the introduction of policies such as BDCs will require securities firms to play a role in venture capital intermediation."

Finally, Lee pointed out that the easing of environmental regulations under Trump's second term administration will increase uncertainty in the global 'ESG' financial market. He explained, "Trump's second term is expected to expand fossil fuel production and promote manufacturing in the U.S., while abolishing or reducing the previous Biden administration's green support policies, including the Inflation Reduction Act (IRA)," and added, "Negative impacts are expected on the domestic ESG financial market and securities firms' ESG product and service development."

He concluded the presentation by saying, "Appropriate response strategies to uncertain financial environments and Trump’s second term financial and ESG policies are important," and emphasized, "It is necessary to seek opportunities to improve profitability in environments such as AI, overseas stock investment, M&A market growth, and Value-up."

Meanwhile, on the same day, Kang So-hyun, head of the Capital Market Office, who presented the 'Capital Market Outlook and Key Issues,' identified this year's major stock market issues as ▲a decrease in domestic investors' participation in the stock market, ▲expectations for corporate value enhancement effects, ▲the need for short- and long-term corporate improvement strategies, and ▲expectations for operating profit recovery. Key institutional issues included ▲market macrostructure changes including improvements to the delisting system, ▲legal improvements to protect shareholder interests, ▲institutionalization of the digital asset market, and ▲resumption of short selling.

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