By Park Hyong-ki
Staff Reporter
The demise effect of Wall Street financiers is not limited within the confines of the U.S. market, but is also taking a heavy toll on retail trading in Korea's stock market.
This, in turn, is putting pressure on securities companies to downsize their retail business centers amid the fall of retail stock brokerage, their key source of profitability.
Tong Yang Securities boasts of the highest number of nationwide retail facilities for investors among over 50 brokerage houses operating in the country.
Its aggressive expansion led the company to run a total of 168 centers last year, thanks to the bullish sentiment.
However, the bear market forced the firm to shut down two of its core businesses, mostly for rich investors, located in affluent southern Seoul last month.
Woori Investment & Securities, the biggest brokerage in terms of profitability, is taking a different tack ― expanding private banking and asset management centers, but reducing the number of retail brokerage outlets.
This means the company plans to focus more on asset management rather than brokering stocks for investors.
It closed down one brokerage center, while opened four private banking businesses in Seoul.
``We will decisively shut down retail centers that do not meet expectations,'' said Park Jong-su, CEO of Woori Investment.
However, market watchers are skeptical as to whether its tactic of mostly targeting the rich in affluent areas is feasible considering declining advantages on all fronts and worsening investor sentiment, not to mention Tong Yang terminating its centers for the rich.
According to the Korea Exchange, retail investment is on the verge of dropping below 40 percent of overall trading on the stock market. It accounted for 46 percent as of last week, down from 53 percent on average last year.
The benchmark KOSPI has tumbled 27 percent since January this year on the subprime mortgage crisis, making investors run for cover or turn to safe investment assets.
Profitability at some 80 investment trust and advisory firms also deeply worsened in the first quarter, with a combined net profit recording at 3.3 billion won, down 91 percent from a year earlier, said the Financial Supervisory Service.
More than half of the companies posted net losses.
Samsung Securities, one of the top brokerages, meanwhile, has cut down the number of its centers to below 100.