As institutions adjust stocks to secure funds, domestic stock prices likely to become more volatile for the time being
100 billion won in brokerage fees due to subscription craze
The volatility of the domestic stock market is expected to increase until LG Energy Solution, which has collected a record-high 114 trillion won in subscription margin, enters the KOSPI on the 27th. This is because institutional investors’ portfolio adjustments to include LG Energy Solutions are continuing.
According to the financial investment industry on the 20th, LG Energy Solution has a market capitalization of 70.2 trillion won based on the IPO price, and will rise to the third place in market capitalization at the same time as its listing on the stock market on the 27th. As a result, early incorporation into major indices such as the KOSPI 200 in March following the Morgan Stanley Capital International (MSCI) in February is likely.
Passive funds such as funds that follow the indices as they are are required to incorporate LG Energy Solutions into their portfolio. IBK Investment & Securities estimated that such passive funds were at least 1,272.2 billion won. This is an estimate based on the market cap based on the public offering price, and there is also a forecast that passive funds will exceed 1.5 trillion won if LG Energy Solution’s stock price rises further.
“Institutions or foreign investors who want to incorporate LG Energy Solutions must secure funds by selling other large-cap stocks in advance,” said Lee Kyung-soo, head of research center at Meritz Securities. In fact, ahead of the LG Energy Solution public offering, the KOSPI continued its downward trend for the past five trading days. Kim Ji-san, head of research center at Kiwoom Securities, said, “There are still not many LG Energy solutions owned by institutions or foreigners. Uncertainties will continue until the listing.”
In the wake of the all-time subscription craze, brokerage firms were able to collect more than 100 billion won in commission income. The 11 domestic and foreign securities companies that have hosted LG Energy Solution’s initial public offering (IPO) will receive a commission of 89.25 billion won, or 0.7% of the public offering amount (12.75 trillion won). In addition, it is expected to receive an additional performance fee of up to 38.25 billion won depending on the contribution and the box office performance.
On the other hand, it is analyzed that some of the 4.42 million individual investors who have jumped into the LG Energy Solution public offering are ‘debt investment’. The negative account balances of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) stood at 5,636.9 billion won as of the 19th, 7.18.7 trillion won compared to the 17th (49,348.2 billion won) the day before the subscription. soared. The number of new negative accounts opened on the 10th and 14th was only 1,098 a day on average, but increased to 1557 and 1610 on the 18th and 19th.
An official from a commercial bank said, “The demand for loans has been quiet in the new year, but it is unusual for credit loans to surge in the past two days. However, if the subscription margin is refunded on the 21st, credit loan growth is expected to slow again.
Reporter Lee Sang-hwan payback@donga.com
Reporter Hyemi Song 1am@donga.com
