South Korea's five major brokerages are forecast to post combined operating profit of about 4 trillion won in the second quarter this year. Analysts attribute the strong performance, which follows first-quarter results, to a robust KOSPI and inflows of investment funds.
According to financial information provider FnGuide on Monday, the second-quarter operating profit consensus for the five brokerages — Mirae Asset Securities, Korea Investment Holdings, Samsung Securities, NH Investment & Securities and Kiwoom Securities — totaled 3.912 trillion won. That marks an 84.1% increase from their combined operating profit of 2.1249 trillion won in the same period last year.
Mirae Asset Securities is expected to show the largest improvement. The brokerage's second-quarter operating profit estimate stands at 1.4002 trillion won, up 179.8% from 500.4 billion won a year earlier. It is expected to be the only major brokerage to surpass 1 trillion won in quarterly operating profit. Its second-quarter net profit is also projected at 1.1107 trillion won, up 173.7% from 405.9 billion won a year earlier, raising the likelihood it will maintain its place in the "1 Trillion Won Club."
Other large brokerages are also expected to record double-digit growth rates. Samsung Securities' second-quarter operating profit estimate is 576.3 billion won, up 86.7% year-on-year, while NH Investment & Securities is projected at 532.6 billion won, up 65.4%, Korea Investment Holdings at 872.3 billion won, up 49.0%, and Kiwoom Securities at 530.7 billion won, up 30.0%.
The major brokerages had earlier posted first-quarter results that beat market expectations. Mirae Asset Securities recorded operating profit of 1.375 trillion won and net profit of 1.0019 trillion won, becoming the first in the industry to join the quarterly net profit "1 Trillion Won Club." Korea Investment & Securities (959.9 billion won), NH Investment & Securities (636.7 billion won), Kiwoom Securities (621.2 billion won) and Samsung Securities (609.5 billion won) also posted strong results.
The analysis that brokerages will continue to improve their earnings rests on rising trading volume and recovering investor sentiment amid a buoyant stock market. The KOSPI's average daily trading volume was 27.056 trillion won in January, 32.234 trillion won in February, 30.143 trillion won in March and 29.551 trillion won in April. Last month, when the KOSPI broke through the 7,000 mark and went on to surpass 8,000, trading volume surged to around 50.215 trillion won. The average daily trading volume from the 1st to the 26th of this month stood at around 51.1845 trillion won, similar to last month.
However, unlike expectations of improving brokerage earnings, brokerage stocks have shown a sluggish trend. From April this year through the 26th of this month, the KOSPI rose 66.48% from 5,052.46 to 8,411.21, repeatedly hitting record highs, but over the same period the KRX Securities Index fell 16.77% from 2,445.11 to 2,034.97. Mirae Asset Securities' share price dropped 34.4% from 61,400 won at the end of last month to 40,250 won on the 26th of this month. Over the same period, Samsung Securities (-13.3%) and NH Investment & Securities (-8.27%) also declined across the board. Contrary to the usual pattern in which the stock market and brokerage shares move together, brokerage stocks have recently entered a correction phase.
In the securities sector, this is interpreted as the result of concerns that the growth in trading volume has passed its peak being pre-reflected in share prices. Although trading volume has continued at record-high levels this year, the analysis is that it is largely a natural expansion driven by rising market capitalization. Still, separate from the weakness in brokerage stocks, some assess that the structural growth potential of the securities industry remains intact. "We expect to benefit from the era-defining trend of a growing investor population, while corporate demand for non-bank financing is rising sharply," said Ahn Young-jun, a researcher at Kiwoom Securities. "Unlike before, it is worth noting that the securities industry itself is growing structurally."
