Bank stocks in Korea have reportedly taken a beating in recent months, as stricter regulatory obstacles have worsened investor sentiment despite quick interest rate hikes.
Since their cash-cow interest earnings increase in tandem with rate hikes, financial equities are seen as one of the main winners of monetary tightening.
However, shares of Korea's four largest financial holding companies stayed gloomy since June despite aggressive rate increases from the U.S. Federal Reserve and the Bank of Korea.
As per data from KRX (Korea Exchange), KB Financial Group’s shares reached an all-time high of ?66,400 ($47.81) per share in late February but have since been declining. KB's stock price increased 0.1% from the previous trading day to settle at ?48,150 ($34.67) per share on Tuesday.
The stock prices of other prominent financial institutions, like Shinhan, Hana, and Woori, showed similar patterns. Early in June, Shinhan shares surged to ?43,450 ($31.28), but have since been falling dramatically. The company's stock decreased 0.29% from the previous day to close at ?34,650 ($24.95) per share.
Woori and Hana's shares also seem to have lost momentum for further rallies since June. While Hana’s share price dropped 0.26% to ?37,950 ($27.32), Woori closed at ?11,550 ($8.32), registering a 0.43% decrease.
Analysts claim that the government's stricter rules aimed at commercial banks are to blame for the worse-than-expected performance.
Following President Yoon Suk-yeol's election in May, the government increased pressure on banks to lower interest rates as part of Yoon's campaign commitment to preventing banks from making excessive interest profits.
The government implemented a rule last month, requiring banks to disclose their loan-to-deposit interest rate differential to increase competition and drive down interest rates as few of them want to be labeled as “greedy”.
Data from exchange operators indicate that bank stocks are showing few signs of recovery. On Monday, the KRX Bank Index ended at 596.94 points, down over 20 points from its end-of-August high of 621.71 points.
Source credit: https://www.koreatimes.co.kr/www/biz/2022/09/175_335674.html