Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Have securities stocks bottomed out?
Seen above is the nation's major financial district in Yeouido, Seoul. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Local securities stocks have bottomed out, but are forecast to bounce back in 2023, as fears of their exposure to real estate project financing will gradually subside when the U.S. Federal Reserve ends its cycle of aggressive monetary tightening, analysts said.
Domestic brokerages suffered a nightmarish period in the latter half of this year amid escalating financial uncertainties here and abroad. According to data from the Korea Exchange, major securities firms' stock valuations displayed a double-digit decline since the start of this year.
Shares of Hanwha Investment & Securities were hit hardest by the year-long stock market doldrums. The firm's stock price plunged by 61 percent between Jan. 4 and Nov. 7. Other major companies also extended losses during the same period. Samsung Securities and NH Investment & Securities shares fell by around 27 percent. Mirae Asset Securities, the largest securities firm here, also suffered a stock fall of more than 25 percent.
The fall was sharper than that of the benchmark KOSPI, which reported a drop of 20 percent.
Analysts raised the possibility of securities stocks suffering from a prolonged slump until the end of 2022 amid multiple risk factors represented by heightened investor jitters triggered by a loan default by a Legoland developer backed by the Gangwon Province and the Fed's additional rate hikes.
But securities stocks are forecast to gain traction for a recovery next year when such risk factors are widely expected to be alleviated, according to the analysts.
“Most securities firms may report dismal earnings reports in the fourth quarter due to such factors, but the situation will take a turn for the better next year,” Yuanta Securities analyst Jeong Tae-joon said.
The prices of stocks in the industry have declined enough to entice investors to hunt for bargains from a long-term viewpoint, according to the analyst.
“Their steep stock fall was attributable to the vague fear sentiment on their real estate exposure and concerns over their possible bankruptcies,” he said. “But such worries have mostly been relieved due to authorities' intervention. Given that the ongoing cycle of monetary tightening is nearing an end and the interest rate goes down, most concerns regarding their risks will be cleared away. This will also drive their earnings growth in 2023 from a year earlier.”