[비즈한국] Since 2021, when the KOSPI surpassed the 3,000-point mark for the first time in history, market sentiment has shrunk significantly as the index fell due to concerns over interest rate hikes and economic slowdown. Investors turned their backs on domestic stocks, claiming that only U.S. stocks held hope.
However, the atmosphere changed after the inauguration of the Lee Jae-myung administration. With the KOSPI showing a steady upward trend, there are not only expectations of breaking through the 5,000-point mark, but observations that even 4,000 is immediately achievable.
Securities stocks, which had been pushed out of investors' interest along with the KOSPI, have also become a hot topic lately. One might ask, “Aren’t financial stocks always boring?” Yet, more people are opening their Mobile Trading Systems (MTS) and searching for securities stocks, asking, “Why is XX Securities rising so much these days?” or “Is this actually making a comeback?”
The KRX Securities Index began to heat up in April this year, surging 23% in May, and rose by more than 28% entering June. Furthermore, as of June 20, the average daily trading value hit 30.9 trillion won—a 50.5% increase from the previous month due to the bullish market—reaching its highest level since February 2021.
Jang Young-im, an analyst at Hyundai Motor Securities 001500, said, “As the KOSPI 5000 was proposed as a campaign pledge, the amendment to the Commercial Act was resubmitted after the election,” adding, “They have announced plans to reorganize tax and institutional systems to promote dividends.” Analyst Jang also predicted, “As the government plans to pursue expansionary fiscal policies through supplementary budgets, an increase in liquidity is expected, which, along with interest rate cuts, will act as a favorable environment for the securities industry.”
Then, how do securities firms make a profit? If you are an investor, you need to understand how these firms generate money.
First, there is brokerage (entrusted trading), where firms earn commissions when investors buy and sell stocks or provide funds for stock purchases. Then there is IB (Investment Banking), which generates revenue through advisory fees for Initial Public Offerings (IPOs), bond issuance, and M&As. There is also WM (Wealth Management), where firms collect fees for managing investors' funds. Additionally, there is PI (Principal Investment), where firms use their own capital to invest and generate profits, and FICC (Fixed Income, Currency, and Commodities), which involves developing and operating spot and derivative products related to foreign exchange, interest rates, and raw materials.
Simply put, when money flows into the stock market, securities firms' profits rise. Especially in times like these, when the KOSPI is rising, trading values are increasing, or major IPOs are scheduled, expectations for the performance of securities firms grow.
Ahn Young-jun, an analyst at Kiwoom Securities 039490, forecasted, “The revenue structure has shifted from being centered on brokerage and IB commissions in the past to being focused on interest income from corporate loans and similar sources,” adding, “The use of additional leverage through instruments like issued notes and Comprehensive Investment Accounts (IMA) will also contribute to securing stable interest income.”
Until earlier this year, securities stocks were merely mentioned as representative high-dividend stocks and did not garner attention as investment targets. However, the story has changed. As the KOSPI recovers to the 3,000-point level and shows signs of breaking out of the box range, interest in the domestic stock market is increasing, which is expected to boost trading value. Furthermore, the possibility of interest rate cuts is growing. Because of this, experts are projecting that securities stocks will continue to rise further.
Kang Seung-geon, an analyst at KB Securities , pointed out, “The primary cause for the surge in securities stocks is not only the will to improve the stock investment environment—such as the revision of the Commercial Act, tax reform for dividend income, and the encouragement of treasury stock cancellation—but also policy expectations to induce a 'money move' into stocks and financial assets to move away from household assets focused on real estate, emphasizing supply over taxes in real estate measures.”
In particular, if the Commercial Act amendment is implemented, shareholder return policies will be further strengthened, and securities stocks, which are typical high-dividend stocks, are highly likely to benefit.
Analyst Ahn Young-jun said, “By participating in the Value-up Program, the propensity for shareholder returns is also increasing. More securities firms are becoming active in not only dividends but also the purchase and cancellation of treasury stocks. Therefore, I believe the recent rise in the Price-to-Book Ratio (PBR) of securities stocks is justified.”
Of course, one should not overlook the fact that stock price volatility may increase depending on policy expectations. If the KOSPI falters, they could fall in tandem. Also, one must carefully examine whether the performance of individual stocks is actually improving. For securities stocks to have their valuations re-evaluated, the execution power of these policies is more important than anything else—at least for a structural rise rather than just a ‘honeymoon rally.’”