Shares of South Korea’s large securities firms have been roaring on expectation over improvement in their balance sheet after they are allowed to add investment banking function from April.

According to the nation’s securities exchange operator Korea Exchange (KRX) on Tuesday, shares of local brokerage firms gained 12 percent as of the end of January from the a month ago, far outperforming the 2 percent gain in the broader Korea Composite Stock Price Index (Kospi). Institutional and foreign investors were drawn to their outlook due to liberalization measure allowing more freedom for securities companies to branch out beyond stock brokerage.

Shares of Mirae Asset Daewoo Securities Co. emerging as the nation’s top brokerage house with net worth of 6.7 trillion won ($5.8 billion) after the merger with Hyundai Securities Co. last year gained 22 percent in January. The second largest NH Investment & Securities Co. also saw its stocks rise 19 percent during the same month. Investors have high expectations on the two firms as they would become the biggest beneficiaries of the financial authority’s measures granting securities firms with more than 4 trillion won ($3.46 billion) equity capital the investment banking function of underwriting commercial papers.

Shares of firms such as Korea Investment Holdings Co. and Daishin Securities Co. that own units in securities brokerage, asset management and savings bank also have been strong. Their shares are buoyed by their sound earnings last year.

Market experts believe that there is still room for further gains in securities stocks as their price-to-book ratio (PBR) comes to a mere 0.7. “Given that PBR of Mirae Asset Daewoo and NH Investment & Securities remains underrated at 0.6, their stocks would maintain the upward momentum for the time being,” said Kang Seung-gun from Daishin Securities.

By Bae Mi-jung

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