"No one is unfamiliar with Samsung Electronics or SK Hynix"... K-Stock Frenzy Shakes Hong Kong

"People who suddenly visit our office out of the blue saying they 'want to buy Korean stocks' have increased significantly."

Local representatives of domestic securities firms that have entered Hong Kong are feeling the K-Stock boom this year. Until last year, investors in Hong Kong knew nothing about Korean stocks, but now there is hardly anyone who does not know Samsung Electronics or SK Hynix.

As a result, changes have occurred in the business models of domestic securities firms' Hong Kong subsidiaries. Previously, their business model centered on institutional investor sales, such as bond brokerage, investment banking (IB), and proprietary trading targeting local institutional investors. Now, there is a movement to strengthen distribution functions that directly connect Korean stocks and financial products with investors in Hong Kong and overseas.

The most notable case is the global investment platform 'MAPS' unveiled by Mirae Asset Securities' Hong Kong subsidiary in June. MAPS stands for Mirae Asset Portfolio Service, allowing users to trade traditional assets such as stocks and digital assets on a single platform. It enables trading of foreign stocks, Korean stocks, and even crypto (virtual assets) all in one place.

This signifies an entry into the retail market targeting local individual investors and high-net-worth individuals (HNWIs), going beyond sales to existing institutional investors. It is the first case of a domestic securities firm entering the Hong Kong retail market. Anthony Chan, Director of Wealth Management (WM) Investment Advisory at Mirae Asset Securities' Hong Kong subsidiary, said, "We noticed that customer interest in conveniently accessing various global markets, including Korea, is increasing, and we paid attention to the rapidly maturing regulatory environment for digital assets in Hong Kong." He added, "We viewed this as a natural turning point and launched 'MAPS.'"

Improved accessibility to the Korean market is also cited as a factor driving these changes. A representative institutional change is the integrated account for foreigners. This system allows overseas local investors to trade Korean stocks through local securities firms without directly opening accounts with domestic securities firms. If an overseas securities firm opens one integrated account with a domestic securities firm, it can process transactions for multiple investors under that account.

Im Kyung-jun, Head of Korea Investment & Securities' Hong Kong subsidiary, said, "In Hong Kong, various financial institutions are active, including major global financial institutional investors, family offices, asset managers, securities firms, and private banks (PB)." He added, "Accessing Korean stocks through local financial institutional investors or Korean-affiliated securities firms is much more efficient in terms of cost and procedure."

He continued, "I believe the core of activating integrated accounts for foreigners is not simply increasing the number of account openings, but enabling Hong Kong financial companies to naturally provide Korean stocks as an investment product category to their existing customers."

Korea-related ETFs (Exchange-Traded Funds) listed on the Hong Kong stock market are also enhancing local investor accessibility. Currently, the Hong Kong stock market trades not only 2x leverage products for Samsung Electronics and SK Hynix but also the KOSPI 200 ETF, CSOP FTSE Hong Kong-Korea Tech Plus Index ETF, and CSOP KOSPI 200 Covered Call Active ETF. The cumulative trading volume of the SK Hynix 2x leverage product has exceeded 1 trillion won from the beginning of this year through August. In June, it ranked third in monthly trading volume.

In the same month, an ETF tracking the KOSPI 200 index was listed, surpassing 30 billion won in trading volume within five minutes of trading. This is the first time a KOSPI 200-tracking ETF has been listed on an Asian stock market outside of Korea. Ding Chen, CEO of CSOP, said, "The importance of the Korean stock market in global portfolios is growing." He added, "The launch of the CSOP KOSPI 200 ETF is a significant step connecting Hong Kong investors with investment opportunities in Korea."

In the past, overseas investors had to open accounts directly with domestic securities firms to invest in Korean stocks, creating high procedural and psychological barriers. Now, with direct investment through integrated accounts for foreigners and indirect investment via Korea-related ETFs, entry barriers have been significantly lowered.

◆ Concentration on Samsung Electronics and SK Hynix Clear Overseas... Preparing Countermeasures Despite Record-Breaking Earnings Forecasts

Expectations are growing that domestic securities firms' Hong Kong subsidiaries will post record-breaking results this year. Although official statistics have not been released, it is reported that first-half trading commissions have already hit an all-time high due to the K-Stock boom.

According to corporate disclosures, the net income for the first half of this year (pre-tax profit for Mirae Asset) for the Hong Kong subsidiaries of four firms—Mirae Asset Securities, NH Investment & Securities, Korea Investment & Securities, and Samsung Securities—was 321.2 billion won, surpassing last year's annual net income (174.2 billion won). This means they generated profits 84% higher than last year's annual results in just six months.

The growth of Mirae Asset Securities' Hong Kong subsidiary is particularly prominent. Its pre-tax profit for the second quarter of this year is estimated at 213.1 billion won (reflecting a 35% share of Hong Kong in overseas subsidiaries' pre-tax profits). This is 2.6 times that of the first quarter (81.3 billion won). The first-half pre-tax profit was 294.4 billion won, already exceeding last year's annual net income (117.4 billion won).

Representatives from the Hong Kong subsidiaries unanimously state, "Brokerage revenue has increased significantly due to the boom in the Korean stock market, and we will achieve results exceeding those of the previous year."

However, with the emergence of unfavorable market changes in the second half, such as volatility in the Korean stock market, the Middle East war, and interest rate hike trends, the Hong Kong subsidiaries have also begun preparing countermeasures. A notable point is that investment in Korean stocks in the Hong Kong market is concentrated on Samsung Electronics and SK Hynix. Since brokerage revenue has increased significantly centered on these two stocks, their stock price movements could determine the performance of the Hong Kong subsidiaries.

Lee Yun-gi, Head of NH Investment & Securities' Hong Kong subsidiary, said, "While we maintain a positive long-term outlook for Korean stocks within Hong Kong, current interest is overwhelmingly concentrated on AI (Artificial Intelligence), HBM (High Bandwidth Memory), and memory semiconductors, with Samsung Electronics and SK Hynix being the primary focus." He added, "There are not many other stocks suitable to attract foreign investors besides these two. Therefore, I believe it is necessary to improve accessibility for foreign investment in areas such as tax, dividends, and voting rights handling, along with the continuous promotion of value-up program policies."

NH Investment & Securities is steadily expanding new businesses, including its equity swap business, which was the first among domestic securities firms to launch last year, to diversify its operations. The equity swap business is expected to break even within its first year.

Korea Investment & Securities comprehensively reorganized its business structure and organization this year. In addition to existing businesses, it expanded IB businesses where the headquarters has strengths, such as the global DCM (Debt Capital Markets), syndicated loans, and acquisition finance. Indeed, together with the headquarters, it successfully completed syndicated loans of $350 million (approximately 472 billion won) for Hyundai Card and $300 million (approximately 404.6 billion won) for Woori Card this year.

Head Im said, "Overseas subsidiaries of domestic securities firms are developing not merely as support organizations for the headquarters, but in a direction where they discover deals locally, connect global investors, and generate independent revenue." He added, "Korea Investment & Securities' Hong Kong subsidiary will also strengthen its role as a platform connecting the capital markets of Korea, Hong Kong, and the globe."

Praise is emerging for 'MAPS,' the global investment platform launched locally by Mirae Asset Securities' Hong Kong subsidiary, describing it as a "completely new challenge." This is because it signifies that an overseas subsidiary of a domestic securities firm, which had focused on institutional investor sales, has entered the retail market targeting local individual investors and high-net-worth individuals.

A local representative in Hong Kong said, "It is a very new attempt to directly enter the retail market locally." He added, "Rather than operating as an overseas subsidiary of a domestic securities firm, it aims to compete on equal footing with local securities firms."

MAPS is evaluated not merely as an app launch but as a decisive move for foreign-affiliated securities firms to secure local individual investors and high-net-worth individuals. For domestic securities firms to enter the overseas retail market, the difficulty is very high due to low local brand awareness making customer acquisition difficult and the need to compete with local financial companies that have been in business for decades. This is why no domestic securities firm had entered the retail market until now. Mirae Asset Securities has stepped up to compete on equal footing with local securities firms in this market.

Anthony Chan, Director of Wealth Management (WM) Investment Advisory at Mirae Asset Securities' Hong Kong subsidiary, said, "Hong Kong individual investors are turning their attention to direct investment in Korean stocks, and with changes in crypto market regulations locally, we created MAPS where one can trade everything from stocks to crypto in one place." He added, "The response has been good because multiple markets, including US, Hong Kong, and Korean stocks, as well as crypto, can be handled in a single app."

He continued, "In particular, Hong Kong is a market that invests by comparatively analyzing global markets." He noted, "When comparing various markets such as the US, they think Korean stocks are unbelievably cheap and see room for further appreciation."

Mirae Asset Securities judged that a turning point had arrived after observing the characteristics of the Hong Kong market and changes in the virtual asset market. Hong Kong is the market where institutional adjustments related to digital assets are being made most rapidly. Mirae Asset Securities' Hong Kong subsidiary received a digital asset retail license from the Securities and Futures Commission (SFC) of Hong Kong in April, laying the foundation to provide digital asset trading services.

Director Chan said, "MAPS is part of the 'Mirae Asset 3.0' strategy." He explained, "It is designed to support customers in conveniently accessing traditional financial products and digital asset services from a single app without geographical constraints." Mirae Asset 3.0 is a next-generation growth strategy centered on global integration and digital assets. The acquisition of virtual asset exchange Digital X (formerly Korbit) was also a move toward this end.

Given that Hong Kong is an Asian financial hub connecting global capital markets, Mirae Asset Securities plans to expand MAPS to global markets such as the US, Korea, China, and Singapore.

On June 26, when MAPS was launched in Hong Kong, Park Hyun-ju, Chairman of the Mirae Asset Group and GSO (Global Strategist), said, "The opening of Hong Kong MTS is not simply about launching one more app." He stated, "It is a moment when Mirae Asset begins full-scale business directly targeting Hong Kong retail customers for the first time in 20 years since establishing a securities firm in Hong Kong in 2007."

He continued, "Mirae Asset's goal is to create a global investment platform, and Hong Kong is the starting point of that journey." He added, "The MTS we aim to build is not just a tool showing numbers, but a platform where knowledge, information, and Mirae Asset's philosophy flow, providing both traditional financial assets and digital assets together."