Brokerages' investment management accounts (IMA) have grown into a 4 trillion won market, but the money flowing into corporate bonds has fallen short of expectations. Market participants had expected IMAs to emerge as a major new buyer in corporate finance and a fresh source of demand for bonds rated single-A and below. Instead, much of the money is going into loans and beneficiary certificates.
IMA assets entrusted to Korea Investment & Securities, Mirae Asset Securities (006800) and NH Investment & Securities (005940) totaled about 3.6183 trillion won as of the first half of this year, according to filings on the Financial Supervisory Service's electronic disclosure system on the 27th. Korea Investment & Securities held the largest principal at 2.8011 trillion won, followed by NH Investment & Securities at 517.2 billion won. Mirae Asset Securities raised its first through third IMA products at 100 billion won each.
Including valuation gains and losses booked during management, total IMA investment assets stood at 3.7133 trillion won. Korea Investment & Securities accounted for 76.8% of the total at 2.853 trillion won, followed by NH Investment & Securities at 544.4 billion won and Mirae Asset Securities at 315.9 billion won.
The largest operator, Korea Investment & Securities, has concentrated its funds in loans and beneficiary certificates rather than corporate bonds, leaving it unable to play the role of a major bond buyer that the market had anticipated. Beneficiary certificates made up 48.2% of its IMA investment assets at 1.374 trillion won and loans 38.8% at 1.1075 trillion won, while bonds came to just 25 billion won, or 0.9%.
Mirae Asset Securities and NH Investment & Securities showed relatively higher bond allocations. Of Mirae Asset Securities' 315.9 billion won in IMA financial assets, corporate bonds accounted for 38.7% at 122.2 billion won and special bonds 19.0% at 59.9 billion won. At NH Investment & Securities, debt securities came to 209.2 billion won, or 38.4%, of its 544.4 billion won in investment assets. Their small share of the market, however, limits how much they can improve overall credit demand.
IMAs must invest at least 70% of their assets under management in corporate finance assets, but that category covers loans and beneficiary certificates as well as corporate bonds. Continued interest rate volatility has also made aggressive bond purchases difficult.
"Lower-rated issuers, including E-Land World, have recently seen a number of unsold offerings amid weak demand," said Kim Sang-in, an analyst at Shinhan Securities (008670). "High rate uncertainty is expected to persist for some time, so a recovery in the lower-rated market will take time."
