Korean securities companies showed poor performance in their overseas business last year, shutting down 10 percent of their total operations in foreign countries after losses from their operations in advanced markets outweighed gains in their branches in emerging markets.

The nation’s Financial Supervisory Service (FSS) said on Monday that about seven, or 10 percent, of 68 overseas branches of 15 domestic brokerage firms closed down their businesses as of the end of last year. “The number of foreign offices of local securities firms is on the decrease due to their weak performance amid rising external uncertainties,” said Cho Hyo-je, director of financial investment department of the FSS.

The number of overseas offices set up by local brokerage firms has been on the steady fall over the past two years from 80 as of the end of 2014 and 75 in the following year. Total seven foreign operations closed down last year: Kiwoom Securities and Hanwha Investment & Securities’ two Chinese subsidiaries; Hana Financial Investment and SK Securities’ three subsidiaries in Hong Kong; Golden Bridge Investment & Securities’ Vietnamese subsidiary; Korea Investment & Securities’ Vietnamese office; and IBK Investment & Securities and Mirae Asset Daewoo’s two Japanese offices.

The local brokerage houses have the most number of foreign branches in China with 18, followed by 12 in Hong Kong, eight in the United States, seven in Vietnam and six in Indonesia.

Their combined overseas operations swung to a net loss of $4.5 million last year after losing $28.4 million. Despite recording profits in emerging countries in Indonesia, Brazil and Vietnam, they made huge losses in advanced countries such as the U.S. with $12.2 million in net loss and Japan with a net loss of $6.1 million. “Their fee income rose in emerging countries with their growing market share, but it was not enough to offset rising costs in pursuing new services and losses on equity valuation in developed nations,” said Cho.

Except 2014 and 2015, Korean securities firms have reported losses in their foreign operations since 2009.

However, the underperformance of Korean brokerages’ overseas businesses that account for just 1 percent of their combined assets and 6.8 percent of equity capital would have a limited negative impact on their overall business.

By Bae Mi-jung

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