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By Anna J. Park
Due to the deteriorating market outlook as well as worsened year-on-year Q1 earnings, local brokerage firms' stock prices hit new 52-week lows on Thursday. As both the domestic and global stock markets continue to plunge with the U.S. Federal Reserve's squeeze on liquidity, the forecast for the brokerage sector is unclear, casting shadows on future upward movements of the stocks.
In addition, brokerage companies' quarterly earnings have also fallen from the same period last year, with a significant decline in the average number of daily transactions. Following a disappointing first-quarter earnings announcement on Tuesday, Kiwoom Securities' stock price rewrote its 52-week low for the second consecutive session, as it fell to 83,200 won ($64.50) at Thursday's closing. The brokerage company's first-quarter operating profit posted 213.2 billion won, a 38.6 percent fall from the same period last year. In terms of quarterly net profit, it fell by 47.11 percent year-on-year, standing at 141.1 billion won. The earnings were also lower than the market consensus by more than 10 percent.
As the company has long held the top position among online stock-trading platforms, the worsening stock market conditions hit it particularly hard, market watchers say.
"Even though Kiwoom Securities' profit structure has been diversified, the weight of retail transactions takes up the majority of its earnings," said Eun Kyung-wan, an analyst at Meritz Securities.
Samsung Securities, which announced its first-quarter earnings on Thursday afternoon, also posted an operating profit of 212.2 billion won, which is a 47 percent fall from the same quarter of the previous year. The firm's first-quarter net profit stood at 151.8 billion won, a 48 percent plunge year-on-year. The company's stock price fell to a new 52-week low on Thursday, although the unsatisfying earnings report was not available during the session.
Mirae Asset Securities also posted a similar year-on-year plunge, as the company announced its first-quarter earnings on Thursday afternoon, showing that its operating profit fell by 31.8 percent year-on-year to 284.7 billion won. The firm's stock also fell to a 52-week low, as investors predicted disappointing earnings prior to the announcement.
Investors took a similar skeptical approach to other brokerage firms that haven't yet disclosed their first-quarter results as well, as the stock prices of Yuanta and SK Securities also fell to 52-week lows on Thursday.
In addition to the expected drop in brokerage commission fees throughout this year with liquidity tightening globally, securities firms' losses from their proprietary trading of bonds are clouding the sector's outlook.
Local brokerage companies hold about 40 percent of their assets in various bonds, amounting to a total of about 244 trillion won, as of the end of last year. Some market watchers say the firms' losses from bonds trading in the first quarter could surpass 2 trillion won due to rapid interest rate hikes.
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