Securities firms see success in Q2Korean securities companies recorded the highest earnings in the second quarter since they were hit by the global financial crisis in 2008, government data showed.
The earnings were given a boost by skyrocketing investment in the stock market by individuals seeking higher returns amid historic-low interest rates.
The total net income of local brokerages stood at 1.2 trillion won ($1 billion) in the second quarter, jumping 23.2 percent from the previous quarter, according to a report by the Financial Supervisory Service (FSS).
The earnings were the highest in almost eight years, since securities firms reported 1.28 trillion won in the second quarter of 2007, before the global financial crisis.
“The central bank’s cut in key policy rates prompted a boom in the Korean stock market,” said an FSS official by phone.
“Many individuals flocked to the stock market as depositing money at banks couldn’t give them satisfactory returns.
“As securities firms ask for more commissions on individuals than institutional investors, the increase in individual investors led to the growth in their earnings,” the official added.
In fact, the FSS data showed that the commission earnings of the securities firms totaled 1.36 trillion won in the second quarter, rising 36.5 percent from Q1.
Total investment by individuals at the brokerages rose to 68.6 percent, from 63.8 percent in the first quarter.
There were only seven brokerages out of all 56 that saw losses in the second quarter, totaling 15 billion won, the FSS report said. The remaining 49 companies earned 1.21 trillion won in total.
As of the end of June, the total value of assets held by Korean brokerages stood at 366.3 trillion won, rising 2.6 percent from the first quarter, the FSS said.
Still, the regulators forecast the brokerages could face a variety of risks in the second half, such as a U.S. rate hike.
“If the U.S. Fed raises rates in the second half and the Bank of Korea follows, it would lead to an exodus in individual investors from the stock market,” said the FSS official.
BY KIM HEE-JIN [firstname.lastname@example.org]