As Korea's stock market surges around its semiconductor "big two" of Samsung Electronics (005930.KS) and SK hynix (000660.KS), concentration in those names has deepened. Amid this trend, analysts forecast that brokerage stocks, which have been sidelined during the rally, could rebound in the second half.
Securities analysts are watching for the possibility that the effect of rising daily average market trading value could spread beyond large-cap semiconductor stocks to brokerage shares.
According to the Korea Exchange on Tuesday, the KRX Securities Index, comprised of major domestic brokerage stocks, fell 4.3% during the month of May. That trailed the KOSPI's return by 32.8 percentage points over the same period.
Individual stocks also performed poorly. Last month, NH Investment & Securities (005940.KS) dropped 17.15%, while other major brokerage stocks weakened across the board: Samsung Securities (016360.KS) (-13.13%), Korea Investment Holdings (-9.35%), Mirae Asset Securities (006800.KS) (-7.42%), Kiwoom Securities (039490.KS) (-6.85%), Yuanta Securities (-4.11%) and SK Securities (-3.20%).
"The KRX Securities Index has failed to rise relative to the KOSPI, and the divergence from the market is widening," said Woo Do-hyung, an analyst at Yuanta Securities. "This is because supply and demand have concentrated in Samsung Electronics and SK hynix."
Indeed, Korea's stock market has recently continued a strong upward trend centered on semiconductor and artificial intelligence (AI) related stocks. The KOSPI surpassed the 8,800 level for the first time ever, and the combined daily average trading value of the KOSPI and KOSDAQ reached 65.8 trillion won, with trading volume increasing significantly.
But as funds concentrated in large-cap semiconductor stocks, brokerage stocks were relatively sidelined. The combined share of Samsung Electronics and SK hynix in the KOSPI's total market capitalization has exceeded 50%.
However, buying has recently begun to spread little by little to other sectors such as finance, shipbuilding, defense and power equipment. As the overall market trading volume grows, expectations for improved brokerage earnings are also rising.
An increase in trading value acts as a direct boon to brokerage earnings. When stock trading increases, brokerage commission revenue rises, and improvements in interest income can also be expected from the expansion of customer deposits and credit loan balances.
Securities analysts expect brokerage earnings growth to continue, with strong performance in brokerage, interest income and trading divisions. The analysis holds that if the flow of funds concentrated in large-cap semiconductor stocks eases in the second half, brokerage stocks could benefit belatedly.
"As semiconductor profit growth rates are expected to slow in the second half, the concentration phenomenon is judged likely to ease," Woo said. "In the process of funds moving to other sectors, a rebound will begin in the securities sector, which offers a clear profit-growth effect from the elevated index level."
In particular, buying has concentrated in single-stock leveraged exchange-traded funds (ETFs) for Samsung Electronics and SK hynix, launched on May 27, acting as a factor driving the increase in trading value.
"The semiconductor earnings leading the market's rise remain solid, and the launch of individual-stock leveraged ETFs is expected to raise turnover rates among investors," Woo said. "The favorable market trading-value environment will continue in the second half." He named Samsung Securities and Mirae Asset Securities as stocks to watch.
Ko Yeon-su, an analyst at Hana Securities, also said, "The securities sector is at a juncture where brokerage revenue expansion from rising trading value and improvements in wealth management (WM) and trading performance from ETF market growth can be expected simultaneously." He added, "Over the medium to long term, there is also a high possibility of securing new revenue sources from the blooming of the digital asset market. I recommend Samsung Securities and Korea Investment Holdings, which have attractive valuations."
