With a month to go before the presidential election, the Democratic Party of Korea and the People Power Party are emphasizing the activation of the stock market and the promotion of venture capital as key economic pledges, leading to analyses that domestic securities firms will benefit from these policies. This is because both parties agree on expanding household asset income through stock market activation and strengthening the competitiveness of domestic industries and finance. It is expected that in this process, the role of securities firms will grow and their revenue will increase.
As expectations for policies grow, securities stocks have surged significantly in the domestic stock market. According to the Korea Exchange on the 14th, the KRX Securities Index, composed of 10 listed securities firms including Mirae Asset Securities, NH Investment & Securities, Korea Financial Group, Samsung Securities, and Kiwoom Securities, has risen by 30.6% this year, surpassing the KOSPI index growth rate of 8.7% during the same period.
Recently, within the securities industry, there is talk that “regardless of who becomes president, securities firms will inevitably make more money.” This indicates a significant consensus between the two parties on activating the capital market. While the specific policy details differ, there is unanimous agreement on the need to enhance the roles of corporate finance and venture capital to shore up the asset income of the middle class by revitalizing the stock market and strengthening the domestic industrial ecosystem.
A representative pledge mentioned as a measure for revitalizing the stock market is to provide tax incentives for listed companies to expand dividends. Representative Lee So-young of the Democratic Party of Korea proposed an amendment to the income tax law that applies a separate tax rate on dividend income for listed corporations with a dividend payout ratio exceeding 35%. Democratic Party of Korea presidential candidate Lee Jae-myung also noted, “If the dividend payout ratio is high, we could consider lowering the dividend income tax or penalizing those with a low dividend payout ratio.”
Kim Moon-soo, a presidential candidate from the People Power Party, has proposed the complete abolition of dividend income tax as a pledge to expand the “third salary” of dividend income. The proposal states that no dividend income tax will be imposed on amounts up to 50 million won, and for amounts exceeding that, a 20% separation tax will apply.
The emphasis by major presidential candidates on expanding dividends is due to the expectation that if listed companies increase dividends, the effect of revitalizing the stock market will follow. The candidate highlighted this last month while emphasizing stock market activation and had a meeting with the heads of research centers at securities firms, during which he stated, “The KOSPI index needs to rise to between 4,000 and 5,000 points for national wealth to increase.”
Revitalizing the stock market will lead to an increase in revenue from brokerage (stock trading) for securities firms.
There is also great potential for an expansion of the securities firm's other revenue source, investment banking, after the new government is launched. Previously, the Financial Services Commission has prepared measures to introduce a comprehensive investment account (IMA) system to expand the scale of domestic securities firms and enhance their competitiveness. If applications for IMA operators are accepted in the second half of this year and designations are completed within the year, the country’s first IMA operator could emerge this year. Korea Investment & Securities and Mirae Asset Securities, both having more than 8 trillion won in equity capital, meet the qualifications.
While some express concerns that the momentum for implementing the policy may weaken with the new government, there are strong voices suggesting that the direction of policy to enhance the capabilities of investment banking (IB) by strengthening securities firms will not fundamentally change. Baek Du-san, a researcher at Korea Investment & Securities, noted, “Strengthening IB will help shift funds from real estate to corporations and enhance future growth drivers, and it is a common topic that transcends party lines. Therefore, it is anticipated that after the election, the policy drive for expanding corporate finance through issuance notes and new IB business will be maintained.”
As the domestic capital market matures, it is expected that the profitability of securities firms will surpass that of banks, continuing the trend of enhancing the role of securities firms. A representative from a small securities firm with high competitiveness in the IB sector stated, “The immediate policy task that the new government must address is to invigorate our economy and find future sources of growth, and such roles are those that cannot be achieved through banks' stable lending, but rather through the roles of securities firms.” He added, “Securities firms with strengths in the IB sector are anticipating the flow of change.”