Despite the increase in issuance and sales, the South Korean securities house has slipped down the country’s league table.

The sales volume of equity-linked securities (ELS) and derivative-linked securities (DLS) at Mirae Asset Securities - formerly Mirae Asset Daewoo - has dropped 63.9% to KRW2.71 trillion in Q1 FY21 quarter-on-quarter (QoQ), leading to a record-wide gap with the redemption amount in two years.

There were ELS and DLS worth KRW3.5 trillion redeemed in the first quarter, 29.2% more than the issuance amount. On a yearly basis, the redemption amount rose 12.9% while the sales increased 9.7%, according to Mirae’s Q1 FY21 earnings report.

The Korean broker-dealer, which took the crown as the most active issuer of ELS in 2020, slipped to the third position in the issuers’ ranking with a volume of KRW2.26 trillion, which translates to a market share of 12% in Q1 FY21 at a short distance from Korea Investment & Securities and Samsung Securities. Mirae’s DLS sales of KRW0.45 trillion represented a market share of 8.6% during the same period.

The past quarter saw Mirae’s net trading revenue grow by four-fold to KRW273.9 billion year-on-year (YoY), or down 26.1% QoQ. That figure accounted for 38.2% of the total net operating revenue, making trading the most profitable segment for the securities house in Q1 2021 followed by brokerage at KRW255.9 billion.   

‘The solid revenue is recognized due to increase in early redemption of derivative-linked products and pre-emptive risk management responding to interest rate change,’ stated the securities house in the report.  

The trading division reported a boost to its client book balance to KRW32.2 trillion from KRW31.2 trillion QoQ as at 31 March, 59.6% of which was sold through derivative-combined securities while the rest sold under repurchase agreements. 

The total outstanding balance of ELS and DLS (derivative-linked securities) climbed to KRW7.59 trillion from KRW7.54 trillion as at March-end, marking the highest in two years.

Revenue from financial product sales, or wealth management, has been on a steady rise during the past year, reaching KRW70 billion at Mirae in Q1 FY21. Approximately 13.2% of the sales, or KRW9.2 billion, was generated through ELS and DLS. Mutual funds, wrap account and trust as well as pension products made up 33.4%, 32.7% and 20.7% of the revenue, respectively. 

The increased revenue was partly attributed to a 7.1% increase of ELS and DLS issuance QoQ, according to the securities house.

Mirae posted a net income of KRW296.8 billion in Q1 FY21, up 54.5% QoQ or up 1.77x YoY with retail, foreign and institutional investors accounting for 69.9%, 14.5% and 15.5% of client activity, respectively, as of March-end. 

Click the link to read Mirae Asset Securities’ Q1 FY21 earnings report and financial statements.