KakaoBank Included in 'Banking Industry Index' "Bank Stocks Rise Again"

[Asia Economy Reporter Lee Seon-ae] KakaoBank is expected to be included in the KOSPI 200, KOSPI 200 Financial, and KRX Banking Industry Index, which is likely to change the status of 'bank stocks.' Additionally, the recent interest rate hike by the Bank of Korea and the possibility of further increases within the year are also expected to act as positive factors for bank stocks.

According to the Korea Exchange on the 2nd, KakaoBank will be included in the KOSPI 200, KOSPI 200 Financial, and KRX Banking Industry Index as it meets the special inclusion criteria, with the index inclusion scheduled for September 10. This is expected to strengthen the demand for bank stocks.

Park Hye-jin, a researcher at Daishin Securities, said, "With the decision to include KakaoBank in the banking industry index, it is time to reconsider bank stocks," adding, "The mid-year dividend in July and the August listing of KakaoBank are expected to calm the outflow (concentration phenomenon) of bank stock demand." She continued, "Shinhan Financial Group's agreement with financial authorities regarding quarterly dividends also suggests that dividend-related issues have been resolved," and added, "The weak phase for bank stocks is coming to an end, and with expectations for net interest margin (NIM) improvement in the second half, the banks' soundness will remain solid."

Foreign investors and institutions have also started showing interest in bank stocks, considering the positive factors of interest rate hikes and the possibility of further increases within the year. As the period of active rate hikes begins, banks' net interest margin (the difference between deposit and loan interest rates) is expected to expand, increasing banks' profits and potentially driving stock prices up.

On the 27th of last month, the day after the Bank of Korea raised the base interest rate, foreign investors net purchased KB Financial Group stocks worth 10.77 billion KRW. This was the 12th largest amount among securities listed on the Korea Exchange by foreign net purchases. On the same day, foreign investors also bought Woori Financial Group stocks worth 10.719 billion KRW (13th largest by amount). Subsequently, on August 31 and September 1, they purchased 10.082 billion KRW and 7.606 billion KRW worth of stocks, respectively. On the 1st, they also net purchased KB Financial Group stocks worth 2.355 billion KRW. Institutions net purchased KB Financial Group stocks worth 11.82 billion KRW and Shinhan Financial Group stocks worth 9.842 billion KRW on the 27th. These were ranked 12th and 20th by amount among institutional net purchases on the Korea Exchange. Over the past month, they have filled their baskets as well. The cumulative net purchases by foreign investors and institutions for KB Financial Group over the past month were 69.479 billion KRW and 24.02 billion KRW, respectively. Foreign investors' cumulative net purchases for Hana Financial Group over the past month were 51.905 billion KRW, and for Shinhan Financial Group, 15.427 billion KRW.

Gu Kyung-hoe, a researcher at SK Securities, analyzed, "The base interest rate hike is positive not only for investment sentiment but also for banks' interest income profitability," adding, "Until recently, bank interest rates lacked factors that would positively affect stock prices, but with the base rate hike, deposit and loan interest rates linked to short-term rates are rising, which is highly likely to lead to an expansion of banks' NIM."