Brokerages flush with cash

Korean securities companies have ample cash reserves as they struggle to secure liquidity amid the euro zone debt crisis and a protracted economic slowdown, data showed yesterday.

According to the data by the Financial Supervisory Service, 62 local brokerage houses had a combined 55.4 trillion won ($49.3 billion) in cash as of the end of June, up 26 percent from a year earlier. Tongyang Securities held the highest amount with 6.7 trillion won, followed by KDB Daewoo Securities with 6.4 trillion won, the data showed.

The surge in brokerages’ cash reserves comes as an economic slowdown stemming from the euro zone fiscal crisis has cast clouds over the future performance of the stock market.

In August, the daily trading volume of the local bourse dropped 46 percent on-year to 4.3 trillion won, hurting securities companies’ earnings as they rely heavily on income from commissions.

But market watchers said brokerages’ rush to secure cash will likely lose intensity in the coming months as global economic uncertainty eases.
“The tendency to have ample cash on hand is expected to die down, helped by U.S. economic stimulus measures and Europe’s efforts to solve its debt crisis,” said Jason Park, an analyst at IBK Investment & Securities. Yonhap