Securities firms face earnings fall amid fears of capital outflow

Traders work in a dealing room of Hana Bank's headquarters in Seoul, Wednesday morning. Yonhap

By Lee Min-hyung

Korea's major securities companies face an earnings decline in the first quarter of 2022 amid growing fears of capital outflow ahead of the U.S. Fed's looming rate hikes, data showed Wednesday.

According to data from market tracker FnGuide, the nation's top five securities firms are forecast to report an earnings drop of more than 20 percent between this January and March, compared to a year earlier.

The negative outlook reflected by escalating financial uncertainties in Korea has been sparked by the Fed's possible rate hikes which are scheduled for March. External geopolitical risks surrounding Ukraine also cloud the outlook for a near-term rebound of the local stock market.

These external risks are escalating fears that foreign and institutional investors will engage in a mass selling spree of local stocks. The benchmark KOSPI has, in recent weeks, plunged to around the 2,700-mark. Late last year, the index hovered around the 3,000 point mark, but has since been on a sharp decline.

Data from FnGuide showed that Mirae Asset Securities' operating profit in the first quarter is estimated to reach 320.2 billion won, down by 23.6 percent from the previous year. NH Investment and Securities is also forecast to drop by 26.9 percent to 273.7 billion won during the same period, according to data.

This is in contrast to their robust earnings performance throughout 2021 when the main bourse set a new high of more than 3,300 points.

However, this will not be the case this year when the global economy is set to enter a cycle of monetary tightening in line with the Fed's move for rate hikes.

“Most securities companies will likely generate less profits from brokerage commission income this year, as the outlook for the local stock market is not as promising as it was a year ago due to the Fed-driven monetary policy shift,” an official from the financial industry said. “Brokerage houses will have to keep finding other revenue areas to offset possible losses from the major profit source.”