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🇰🇷 South Korea /Economy & Trade

S. Korean brokerages ride stock market boom, but future earnings uncertain

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • South Korean securities firms saw a nearly threefold increase in commission revenue in the first half of the year, reaching 6.97 trillion won, surpassing their total for the previous year.
  • This surge is attributed to a booming stock market, with average daily trading volume tripling and ETF trading volume quadrupling.
  • However, recent market downturns have raised concerns about sustaining this profitability, as commission fees remain a significant portion of revenue for many firms.

South Korean securities firms are celebrating a record-breaking first half of 2024, driven by an unprecedented surge in stock market activity. The top 10 firms collectively earned 6.97 trillion won in commission revenue from trading stocks, bonds, and overseas equities. This figure represents a nearly threefold increase from the 2.46 trillion won earned in the same period last year and even surpasses the total commission revenue of 6.26 trillion won for the entire previous year.

The commission revenue for the first half of the year reached a total of 6.97 trillion won.

— Analysis of Semi-Annual Reports of Top 10 Securities FirmsThe article cites the combined commission revenue of major South Korean securities firms for the first half of the year.

The dramatic rise in revenue is directly linked to the explosive growth in trading volumes. The average daily trading volume on the KOSPI market has tripled to 35.7 trillion won this year, while the average daily trading volume for Exchange Trated Funds (ETFs) has quadrupled from 5.49 trillion won to 24.08 trillion won. This heightened trading activity, particularly in single-stock leverage products fueled by soaring prices of major companies like Samsung Electronics and SK Hynix, has significantly boosted brokerage commissions.

Despite the celebratory atmosphere and record profits, a note of caution is emerging. The substantial reliance on commission fees, as highlighted in Meritz Securities' semi-annual report, makes the firms vulnerable to market fluctuations. The recent sharp decline in the KOSPI index has led to a significant drop in daily trading volume, falling to 19 trillion won on August 10th from a high of 80 trillion won in May. This contraction in trading activity raises concerns about the sustainability of the current profit levels.

Despite diversification efforts, commission fees still account for a high proportion of total commission revenue for domestic financial investment companies.

— Meritz SecuritiesMeritz Securities noted the significant role of commission fees in their semi-annual report.

Analysts predict that the second quarter might have marked the peak for securities firms' performance. While diversification efforts are underway, the core revenue stream remains heavily dependent on brokerage commissions. The recent market downturn signals a potential challenge in maintaining the "party atmosphere" through the end of the year, as investor sentiment cools and trading volumes contract.

Securities firms' earnings are expected to peak in the second quarter.

— Woo Do-hyungAn analyst from Yuanta Securities provided an outlook on the sector's performance.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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