 |
Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] South Korean brokerages are issuing a wave of downgrades on domestic financial stocks, warning that recent sharp rallies—fueled by expectations for dividend tax reforms and a proposed mandatory treasury share cancellation system—may have outpaced fundamental earnings and dividend capacity.
On July 21, Mirae Asset Securities downgraded its investment ratings for several insurance stocks, including Samsung Life Insurance, DB Insurance, and Korean Re, from “Buy” to “Hold.” While target prices were revised upward to reflect recent share price gains, analysts cautioned that the stocks now offer limited upside potential.
“Mere 4% dividend yield at Samsung Life remains unattractive even when considering potential tax benefits under a separate taxation scheme,” said analyst Tae-joon Jung of Mirae Asset Securities.
DB Insurance, which has seen a strong rally this month, was also noted as unlikely to execute treasury share cancellations, and even with an improved payout ratio, the dividend yield is projected to remain in the 6% range.
Mirae Asset Securities, which has surged 154% year-to-date, also saw its investment rating downgraded by multiple brokerages. Analysts cited limited near-term impact from treasury share cancellations and its blockchain business, which have been key drivers of recent share price momentum but are unlikely to translate into tangible earnings in the short term.
Similarly, Hanwha Investment & Securities downgraded its ratings on eight bank stocks—including KB Financial Group—on July 9. While target prices were revised upward, all investment ratings were changed from “Buy” to “Hold,” and the sector outlook was revised to “Neutral.”
Analysts emphasized that while policy-driven sentiment may have lifted valuations, a more cautious approach is warranted going forward given the uncertainty of actual policy implementation and the relatively modest improvement in core fundamentals.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
