“Kiwoom Securities Faces Stock Price Decline and Receivables Losses Due to CFD Controversy”

[이코노미스트 마켓in 홍다원 기자] After the pile-up of lower limit prices from Societe General (SG) Securities, bad news is overlapping with Kiwoom Securities. Kim Ik-rae, chairman of the Dawoom Group, announced that he would step down as chairman and director of Kiwoom Securities, but the fire grew.

Kiwoom Securities’ stock price is also on a downhill path, and there are concerns about large-scale losses on receivables due to CFD losses. As Kiwoom Securities has maintained its No. 1 share in the domestic stock market, a boycott of ‘Hero Moon’ by ant investors is spreading.

According to the Korea Exchange on the 5th, Kiwoom Securities finished trading at 89,000 won, down 1.22% (1,100 won) from the previous trading day on the 4th. It has fallen for 9 consecutive trading days since the 20th when the pile-up of the lower limit occurred.

Kiwoom Securities, which was traded at the closing price on the 19th (107,400 won), fell 17.13% until the previous day, collapsing to the 80,000 won level.

Although it is not as much as the 8 stocks that collapsed to the lower limit, it seems that investor sentiment has declined and adversely affected the stock price of Kiwoom Securities.

Kiwoom Securities is a key affiliate of the Daou Kiwoom Group. The governance structure of the Dawoo Kiwoom Group is connected to Chairman Kim’s family → e-money → Daou Data → Daou Technology → Kiwoom Securities → Kiwoom Investment.

Previously, Chairman Kim sold 1.4 million shares (3.65% stake) of Daoudata on the 20th. It secured 60.5 billion won by disposing of it through an after-hours trading method (block deal) at an average of 43,245 won per share. At the time, it sold at a 10.6% discount from the previous day’s closing price, taking profit from the market.

Daou Data’s stock price plummeted as a counter-trading volume bomb exploded through the counter of SG Securities. Suspicion that Chairman Kim had known about the collapse in advance spread widely.

As Kiwoom Securities is one of the securities companies that signed a CFD contract with SG Securities, the possibility of experiencing a loss on receivables due to a trade bomb increased. This is because if the CFD investor cannot cover the amount of loss, the securities company has to bear it.

CFDs are over-the-counter derivatives trading that allows investors to leverage the underlying assets without stocks. In order to trade, customer margin must be deposited and maintenance margin is also required. When 8 stocks hit the lower limit and the margin became insufficient, counter-selling occurred and investors found it difficult to pay the margin.

If CFD investors fail to settle losses and receivables arise, the brokerage firm ultimately bears the burden. The securities industry predicts that the amount of receivables from Kiwoom Securities will be large. The total damage to the industry is estimated to be in the hundreds of billions of won.

In fact, Kiwoom Securities sent a text message to CFD investors asking them to liquidate the outstanding balance, saying that an additional margin of about 1.27 billion won had been generated in the CFD domestic stock account. When the margin call rate reaches less than 40%, real-time reverse trading is notified.

Ant investors are also turning their backs on Kiwoom Securities. Kiwoom Securities is a securities company that has grown together with individual investors, recording the number one share in the domestic stock market for 17 consecutive years. As investors’ trust is broken, the possibility of leaving the ‘Hero Moon’ is increasing.

Investor A, who has been investing in stocks through Kiwoom Securities since 2006, said, “I have been using Kiwoom Securities since I started investing in stocks. I am thinking about whether to move the stock,” he said.

An official from the financial investment industry explained, “Since it is a securities company with a large scale and a large volume of individual investors, controversy will inevitably continue for the time being.”

ⓒThe Economist (“Economic News for Tomorrow” Unauthorized copying and redistribution prohibited)