Securities stocks in Korea are gaining momentum. Following the recent earnings announcements where several brokerage firms reported record-breaking operating profits exceeding 1 trillion KRW, investor sentiment is improving due to expectations for the government's corporate value enhancement plan and increased shareholder returns such as dividends.
According to the Korea Exchange, Korea Financial Holdings closed at 78,600 KRW on February 11th, up 600 KRW (0.77%) from the previous trading day. Korea Financial Holdings has rebounded by 10.2% this year, reaching a 52-week high of 81,000 KRW on February 7th.
Other securities stocks are also showing similar upward trends. Samsung Securities closed at 46,650 KRW, up 7.2% from the end of last year. Other gainers include Meritz Financial Group (7.1%), NH Investment & Securities (4.1%), and Daishin Securities (3.2%).
Securities stocks struggled at the end of last year due to political uncertainties such as the declaration of martial law, the inauguration of the Trump administration, and concerns about a global interest rate freeze. However, with the government's value-up program gaining traction and expectations for cherry blossom dividends after March, buying sentiment has been building up this year.
Individual investors have net bought 23.1 billion KRW worth of Kiwoom Securities shares and 2.1 billion KRW of Mirae Asset Securities shares this year. Foreign investors have also net bought 21.3 billion KRW worth of Samsung Securities shares.
Brokerage firms are actively pursuing value-up plans this year. Kiwoom Securities announced on February 5th during its fourth-quarter earnings conference call that it will soon release its second value-up plan. This announcement comes after criticism that its initial value-up announcement lacked key indicators such as total shareholder return (TSR) and cost of equity (COE).
Samsung Securities has yet to announce its value-up plan, but it is expected to do so this month or next month, considering that Samsung Fire & Marine Insurance, the first among Samsung financial affiliates, announced its plan on January 31st.
Mirae Asset Securities previously announced its plans to increase its return on equity (ROE) to 10% and raise its shareholder return propensity to over 35% by 2026. The company is reportedly preparing its second announcement. In addition, smaller brokerage firms such as DB Financial Investment and Yuanta Securities have also announced their value-up plans.
Expectations for cherry blossom dividends, which are paid after the March shareholders' meeting, are also boosting securities stocks, which are traditionally high-dividend stocks.
As of February 11th, a total of 13 securities firms, including Mirae Asset Securities, Meritz Financial Group, and Korea Financial Holdings, will determine the size and timing of their 2024 fiscal year dividends after March. In particular, with the value-up trend this year and five companies reporting over 1 trillion KRW in operating profits, dividend capacity is expected to be ample compared to last year.
NH Investment & Securities, in particular, saw its operating profit increase by 24% year-on-year to 901.1 billion KRW last year. In its value-up plan, the company promised to pay a base dividend of 500 KRW plus additional dividends, raising expectations that it could exceed its record-high dividend of 1,100 KRW per share paid in March 2022.
Yoon Yu-dong, a researcher at NH Investment & Securities, said, "Expectations for market revitalization are high after easing domestic political uncertainties, and the securities industry has value-up momentum throughout the year. The recent Trump tariff issue, which has come to the fore, is not expected to have a significant impact on the industry, as it has a fee-based business model."
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