[Click e-Stock] "IMA Launch... Maintain Overweight View on Securities Sector"

On November 20, Korea Investment & Securities stated, "The Financial Services Commission has designated two domestic securities firms as comprehensive financial investment businesses (so-called 'comprehensive investment firms') with equity capital of at least 8 trillion won," adding, "We maintain our overweight stance on the securities sector."

On this day, Baek Doosan, a researcher at Korea Investment & Securities, commented, "Not only will this expand profits in the relevant segments, but it will also generate synergy." He named Kiwoom Securities as the top pick in the sector, with Samsung Securities as the second preference.

The previous day, at its 20th regular meeting, the Financial Services Commission reviewed and approved the designation of Korea Investment & Securities and Mirae Asset Securities as comprehensive investment firms and Individual Managed Account (IMA) operators, both requiring equity capital of at least 8 trillion won. IMAs are financial products that guarantee principal while also providing performance-based dividends, and are permitted only for comprehensive investment firms with equity capital of at least 8 trillion won.

The commission also approved the designation of Kiwoom Securities as a comprehensive investment firm with equity capital of over 4 trillion won, as well as licensing for short-term financial business. As a result, the number of comprehensive investment firms eligible for issuance of promissory notes has increased to five: Korea Investment & Securities, NH Investment & Securities, KB Securities, Mirae Asset Securities, and Kiwoom Securities.

There are two new developments regarding operations. First, both IMAs and promissory notes require that at least 25% of total funds raised be allocated to domestic venture capital. Of this, investments in 'A-rated bonds and mid-sized companies' will be recognized for up to 30% of the venture capital allocation requirement. Baek explained, "This is a measure to prevent allocation from being concentrated in low-risk assets," adding, "It will strengthen incentives for other investments, such as loans to small and venture businesses and investments in BBB-rated bonds."

Second, the National Growth Fund and Business Development Company (BDC) have been recognized as domestic venture capital. The National Growth Fund is scheduled to launch on December 10, and related fund-issued bonds and fund-invested funds have been officially designated as eligible investment vehicles. Baek noted, "This is a positive development for the securities industry," and estimated, "For Mirae Asset Securities, the total fee rate after deducting IMA loss provisions is expected to be around 0.8% to 1.0%."

From the client perspective, there will be more opportunities to invest in and finance promising long-term sectors, even with relatively small amounts. For securities firms, there are economies of scale compared to private equity funds from a product sales perspective, and potential synergies with traditional investment banking operations from a management perspective. Baek added, "If a significant number of other securities firms currently undergoing the licensing process receive additional approvals, they are likely to actively support the government's policy for a major productive finance transformation."

Baek cited strong performance growth in the investment banking segment as the key reason for selecting Kiwoom Securities as the top pick, emphasizing, "Both the brokerage and promissory note divisions have high profit sensitivity." Regarding the second-preference Samsung Securities, he stated, "If the company can add new investment banking businesses to its retail competitiveness and high dividend appeal, a revaluation of its valuation (stock price relative to corporate value) is expected."

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