In a situation where securities firms that release model portfolios (MP) are gradually disappearing, KB Securities is drawing attention for its performance that stands out in the market.
MP is a list of recommended stocks published monthly by securities firms. Through the MP, securities firms have provided investors with a type of investment guideline by revealing preferred stocks and their allocation ratios. At one point, there were high expectations that it would help improve individual investors' revenue. However, the burden is heavy on securities firms that must release recommendations, and since there aren't many individuals utilizing them, the number of securities firms publishing MPs has gradually decreased, with only KB Securities, Hana Securities, and Yuanta Securities Korea currently releasing them.
According to financial information provider FnGuide on the 19th, over the past three months, the revenue of KB Securities' MP was 6.04%, significantly outperforming the revenue of the Korea Composite Stock Price Index (KOSPI) during the same period (-3.59%). In contrast, Yuanta Securities Korea (-3.27%) and Hana Securities (-3.59%) achieved performance roughly in line with the index's fluctuations during the same period.
The strong performance of KB Securities' MP can be attributed to its high allocation in defense stocks. In its April MP report, KB Securities noted, "Despite the resumption of short selling this month, attention should be paid to defense stocks, which are the leading stocks," while allocating over 10% to Hyundai Rotem and HD Hyundai Marine Solution. While the resumption of short selling is a domestic issue, defense stocks are judged to have the potential for substantial profit growth as global theme stocks.
At the same time, it identified consumer stocks as a turnaround sector where investments can be made relatively stably. It is anticipated that consumer stocks will defend revenue in the context of risk avoidance from the declining defense stocks. This underlies the decision to increase the total allocation for APR and Shinsegae to the 5% range this month.
However, among the turnaround sectors, it reduced the allocation for battery and steel sectors, which are expected to experience high volatility due to an increase in short positions. This month, it lowered the allocation for POSCO Holdings to the 1% range and excluded Hyundai Steel, which was previously suggested at nearly 3%. This strategy has also been effective, as both stocks have fallen approximately 9% and 8.4% this month.
KB Securities reviews the MP performance within its research center every month and has established a system for organic collaboration among teams. The strategy team decides how much to allocate, while the preferred sectors are determined collaboratively by the stock, market, and quantitative sections, and corporate selections are made by designated analysts. KB Securities explains that a system is in operation to quantitatively analyze and assess monthly performance by stock, enabling the possibility of excess performance.
Additionally, KB Securities is organizing a concise portfolio to ensure that the MP serves as an effective guideline for individual investors. Kim Min-kyu, a research committee member at KB Securities, explained, "Unlike the research centers of other large firms, KB Securities comprises around 30 stocks, which makes it easier for individual investors to reference them." In the past, KB Securities also utilized the MP as advisory material for financial products like wrap accounts and direct indexing services.
KB Securities has been performing well enough to generate word-of-mouth among individual investors, but there is a general decline in interest in MPs across the industry. Currently, only three securities firms in South Korea regularly publish MPs. Not only is there a burden regarding revenue after each MP release, but demand for MPs has decreased due to the increasing number of custom investment services, including algorithm-based investment strategies. Mirae Asset Securities, for instance, provides MPs only as a subscription service for retirement plan participants.
A securities firm official noted, "In a situation where the number of analysts in securities firms is gradually decreasing, it is a fact that smaller firms cannot cover all sectors, making it difficult to publish MPs. The purpose is not a business expecting revenue, but rather to convey the securities firm's view; thus, it is challenging for smaller firms to prioritize this situation."