Korea Investment & Securities forecasted on the 13th that the average daily transaction volume in the domestic stock market will increase in the third quarter of this year (July to September). Considering this, Korea Investment & Securities maintained its opinion of 'increasing allocation' for the securities sector.
Park Baekdusan, a researcher at Korea Investment & Securities, revised the average daily transaction volume estimate for the third quarter of this year from 17.3 trillion won to 23.2 trillion won. This is because, in line with a bull market, the average daily transaction volume surged to 27.9 trillion won this month. Baek noted, 'There is a possibility of further upward adjustment of the transaction volume estimate depending on the future development and duration of the bull market.'
Although the securities sector index has increased 70% compared to the beginning of the year, Baek explained that the valuation attractiveness of major securities firms remains strong. He also noted that policy benefits and a bull market in the capital market continue to drive the increase in profits related to brokerage, trading, and corporate finance.
Baek named Kiwoom Securities as the top pick, raising the target price to 235,000 won. This is because the strong transaction volume and benefits from new issuance and certificates are likely to impact Kiwoom Securities' performance significantly.
Baek evaluated that Kiwoom Securities can also handle a burden related to 400 billion won in redeemable convertible preferred stocks (RCPS). He mentioned, 'Looking at Kiwoom Securities' RCPS and convertible bonds (CB) from 2020 to 2021, the stocks were converted when the stock price was on average 28% higher than the conversion price. Considering that Kiwoom Securities' closing price on the 11th was 26% higher than the RCPS conversion price, the overhang amount is likely to begin to come out soon.'
He further stated, 'However, excluding Daou Technology's equity, 350 billion won represents the actual overhang amount, and in periods when performance estimates are rising like now, the related negative impact can be minimized.'
Baek adjusted the target prices for Samsung Securities and NH Investment & Securities to 78,000 won and 21,500 won, respectively. This is due to the increase in projected net profit estimates for Samsung Securities and NH Investment & Securities by 11% and 17%, respectively, mainly in the brokerage and trading sectors.
Although there are concerns that the share of the alternative trading platform Next Trade (NXT) has surged and may limit transactions, Baek assessed that the impact on the securities sector is limited. This month, the average daily transaction volume on Next Trade compared to the Korea Exchange (KRX) is 43%. Considering the capital market law's enforcement regulation, which limits it to 15% over six months, some stocks may drop out of Next Trade trading or reduce their trading hours.
Baek noted, 'Realistically, changes in trading stocks are expected around July, but it will settle without significant disruption through phased reductions in trading stocks.'