Brokerage houses in South Korea are enjoying a heyday amid stock frenzy led by retail investors.
The total stock transaction amount reached 64.2 trillion won ($58.4 billion) in Korea on Monday, jumping 39 percent just in two trading sessions since Jan. 7 when the benchmark Kospi broke the 3,000-mark for the first time. The figure is more than double the usual daily turnover.
The explosive growth in stock transactions is also driving up the share prices of the country’s major brokerage houses fast, as the more transactions mean bigger brokerage commission incomes.
Kiwoom Securities shares finished Monday 6.58 percent higher at 162,000 won, while Hyundai Motor Securities closed up 15.13 percent and Hanwha Investment & Securities up 11.43 percent. The KRX index of securities service sector ended the day at 824.19 after adding 100 points in six trading sessions.
On Tuesday, the securities stocks are trading lower as the Kospi took a breather.
Stock transactions by retail investors totaled at 8,712 trillion won in 2020, nearly tripled from the previous year. Also, the turnover ratio in the stock market, referring to the ratio of total stock traded to average market capitalization, reached 363 percent in 2020, the highest since 2000, according to SK Securities analyst Koo Kyung-hui.
On top of commission earnings, brokerages expect fat interest income from loan sales. The outstanding balance of margin accounts, or the brokerage accounts that brokers lend cash to customers for stock purchases, averaged at 36 trillion won in the September-December quarter last year, up 33 percent on year. The balance is estimated to grow further by 10 percent this year, projected Baek Doo-san, a Korea Investment & Securities analyst.
The market has worked very favorably for securities firms, said Kim Do-ha of Cape Investment & Securities, suggesting buy in the category until the liquidity starts to show signs of contraction.
By Kim Ki-cheol and Cho Jeehyun
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