More than half of Korean securities stocks test 52-week bottoms on murky outlook

More than half of 13 South Korean securities stocks have hit 52-week lows as they enter a bust cycle after asset investment boom over the last two years under loose liquidity environment of the pandemic.

As of Thursday, 13 out of the 22 securities firms listed on the Kospi tested new 52-week lows this month. In May, the Kospi securities category index fell 7.3 percent, underperforming the main index fall of 4 percent.

Both big and small securities stocks were hit by selloffs with large-cap Mirae Asset Securities and Korea Investment Holdings shares each losing 9 percent and 16 percent to their record lows.

For the past two years, securities firms enjoyed record-high earnings driven by abundant liquidity thanks to worldwide stimuli policy to prop up the economy hit by the Covid-19 pandemic. Securities stock prices also soared as they promised generous dividends of 6 to 7 percent.

The outlook for their earnings has turned grim as the liquidity binge has ended with central banks grappled with runaway inflation.

The combined operating profit of securities firms in the first quarter fell 34 percent compared to the same period a year earlier amid thinned stock trade, reducing their primary fees from brokerage along with investment banking commissions from subdued IPOs.

The average daily trade turnover of stock markets in April dropped 6.7 percent to about 18.6 trillion won ($14.6 billion).

Rising interest rate environment has also dampened their income from securities trade, while equity linked securities market also stays stagnant due to the plunge in underlying assets and indices.

Seoul-based market tracker FnGuide forecast that the country’s securities sector to see a 25 percent on-year fall in operating profit in the second quarter.

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