Shares of Hyundai Securities Co. and KB Financial Group have been on an upward swing on expectations that KB Financial Group’s decision announced early this month to exchange stocks of the two companies would further boost the value of their stocks.

On Monday, shares of Hyundai Securities closed at 7,210 won ($6.42), up 7.1 percent or 480 won from the closing on August 2 when KB Financial Group announced to swap its stocks with Hyundai Securities shares in 1:0.1907312 ratio and buy back treasury stocks as part of the process to incorporate the brokerage firm as a fully-owned entity before the merger with KB Investment & Securities Co. Its stocks that have been trading below 7,000 won apiece since May got a boost from the stock swap news and finally topped 7,000 won today. Shares of KB Financial Group also climbed 2.8 percent, or 1,050 won, from the previous session to close at this year’s high of 38,400 won. In less than one month after the stock-trade announcement, KB Financial shares jumped about 9 percent.

The surge in Hyundai Securities shares comes despite its disappointing second-quarter earnings due to losses from equity-linked securities (ELS) management. Investors with Hyundai Securities stocks will receive one KB Financial share per five Hyundai Securities shares.

For the benefit of its own shareholders and to protect their interests, KB Financial Group has also decided to purchase 500 billion won worth of Hyundai Securities treasury stocks and such a move would prevent overall dilution of shareholder value once new KB Financial shares are issued for the stock exchange. KB offers to buy the share at 6,637 won per piece.

The stock trading with listed KB Financial Group has also eased worries that Hyundai Securities’ merger with non-listed KB Investment & Securities would weigh against Hyundai Securities’ shareholders. The trading with listed KB Financial Group allowed the exchange ratio to be set up based on fair market price.

Hyundai Securities will be delisted from the Korea Exchange by the end of November once its shares are converted to KB Financial shares. The stock trading and buy back proposal will be put to a vote during a shareholders’ meeting on October 25.

By Chun Gyung-woon

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