Korean securities firms’ overseas subsidiaries saw their profits in 2018 increase 2.5 times from the previous year, the Financial Supervisory Service (FSS) said on April 21.
By region, China was the only country where Korean securities firms suffered a loss. The reasons included the intensified trade dispute between the United States and China, Chinese government’s regulations, and a market downturn. However, their profit in the Southeast Asian market, a key target area, ballooned.
Last year, the 47 overseas subsidiaries set up by 13 domestic securities firms posted US$122.8 million in combined net profits, a big jump of 155.7 percent from US$48.0 million in 2017.
By region, their profits in Hong Kong were highest at US$57.8 million, followed by Vietnam at US$18.3 million, Indonesia at US$17.7 million and the United States at US$ 16.2 million. In addition, the 47 overseas subsidiaries also recorded surpluses in India (US$5.7 million), Brazil (US$3.5 million), the United Kingdom (US$2.4 million), Thailand (US$2.1 million), Singapore (US$400,000), Cambodia (US$100,000) and Mongolia (US$100,000). But in China, they suffered a deficit of US$1.3 million.
"In the case of China, local corporations of Korean securities firms are registered as general consulting companies rather than financial investing companies due to regulations, so their scopes of business are limited," an FSS official said. “Their business operations were also affected by the deterioration of the business environment stemming from a slowdown in market growth and the trade war between the United States and China.
Their net profit soared in six emerging economies in Southeast Asia including Vietnam and Indonesia.
As of the end of last year, there were 14 domestic securities companies that have entered overseas markets. They were running 62 foreign branches -- 47 locally incorporated affiliates and 15 overseas offices. Compared to 2017, the number of local affiliates dropped by one. By region, there were 48 (34 local corporations and 14 offices) in Asia including 14 in China, nine in Hong Kong, eight in Indonesia, and seven in Vietnam, followed by the United States (nine), the United Kingdom (four) and Brazil (one).
In particular, the proportion of their overseas shops in six emerging economies in Southeast Asia such as Vietnam and Indonesia grew from 30.2 percent in 2017 to 33.9 percent in 2018. Mirae Asset Daewoo had the largest number of overseas branches with 15, followed by Korea Investment & Securities with nine, NH Investment & Securities with eight, and Shinhan Investment with seven. Including those of Samsung Securities and KB Securities, the proportion of the six largest securities firms stood at 77.4 percent.
At the end of last year, total assets of securities firms’ overseas subsidiaries rose 50.6 percent to US$ 49.45 billion, and their owners' equity increased 81.9 percent to US$4.73 billion year on year.
"These days, Korean securities firms led by six general financial investment firms are active in making a foray into Southeast Asia such as Vietnam, and are expanding their overseas operations through the issuance of new shares to be purchased or the acquisition of a local corporation," an FSS official said. "They are diversifying their income sources such as promoting the brokerage and IB business and starting prime brokerage services."