Brokerage stocks that rose sharply on the back of gains in the domestic stock market in the first half are tumbling as the market falters. In particular, a drop in trading value and worries about a slowdown in third-quarter earnings are weighing on share prices.

According to the financial investment industry, Mirae Asset Securities shares fell to 28,400 won on Oct. 12. That is down about 66.1 percent from 83,800 won on May 6. The stock has given up most of its gains since the start of the year and has fallen below 30,000 won.

Other large brokerages are in a similar situation. Over the same period, Kiwoom Securities fell 50.9 percent to 238,000 won from 484,500 won. Samsung Securities slid 44.6 percent to 82,800 won from 149,500 won, while Korea Investment Holdings dropped 43.2 percent to 165,600 won from 291,500 won. NH Investment & Securities also fell 36.9 percent to 24,250 won from 38,450 won.

Small and mid-sized brokerages have not avoided the downtrend. Hanwha Investment & Securities, Kyobo Securities, Yuanta Securities, Hyundai Motor Securities and DB Financial Investment have also given back a significant portion of their first-half gains.

Weakness in brokerage stocks is tied to the broader domestic market. KB Securities said the securities sector (KRX Securities) index fell 20.1 percent in the third quarter this year. That was 0.8 percentage points more than the KOSPI's 19.3 percent decline over the same period.

As the domestic stock market rose sharply in the first half, brokerages posted strong results on higher fee income from increased trading value and robust performance in proprietary trading. In the second half, concerns about profitability grew as the market's rise lost momentum and investor trading declined.

In the third quarter, daily average trading value in the domestic stock market was 52.42 trillion won, down 41.7 percent from the previous quarter. Daily average trading value was 44.2 trillion won for the KOSPI and 8.3 trillion won for the KOSDAQ. In September, daily average trading value fell 19.0 percent from the previous month to 40.1 trillion won.

Exchange-traded fund (ETF) and overseas stock trading also contracted. Daily average ETF trading value in the third quarter was 22.9 trillion won, down 18.5 percent from the previous quarter. Overseas stock trading volume also fell 30.7 percent to $124.9 billion.

Brokerages have a structure in which brokerage commission revenue rises as trading value increases. Conversely, when trading declines, brokerage income falls and proprietary trading profits linked to the stock market are also affected. That has weakened expectations for earnings improvement that drove brokerage shares higher in the first half.

The outlook for third-quarter results is also not bright. The market estimates combined third-quarter net profit at five major brokerages at about 1.1 trillion won. That would be down 45.1 percent from a year earlier.

Brokerage-related profit is expected to fall 51.6 percent from a year earlier. Profit from investment banking (IB) and revenue from wealth management (WM) are also expected to decline. The assessment is that weaker investment returns from a falling stock market and a contraction in trading value will be reflected across overall results.

Still, some see whether the slide in brokerage stocks becomes prolonged as hinging on a recovery in stock market trading. That is because profitability in the brokerage sector remains heavily influenced by trading value and investment asset management performance.

Shareholder-return policies such as dividends and share buybacks and cancellations are also cited as variables for a rebound in share prices. The view is that, as brokerages have strengthened shareholder returns on the back of improved results, dividend appeal after the share-price drop could spur investment demand.

Kang Seung-geon (강승건), an analyst at KB Securities, assessed that major brokerages could secure downside rigidity in share prices given projected dividend yields of about 6 to 7 percent for 2026 to 2027. He also presented higher investment returns from expanding the issuance of short-term notes and comprehensive investment accounts (IMA) as medium- to long-term growth factors.

Still, if a recovery in trading value is delayed, it is unlikely to be easy to secure momentum for share-price gains in the short term.

Kang said, "Since not only trading value but also the performance of investment assets is linked to the stock market, if weakness in the stock market continues, it will be difficult for the brokerage sector to see short-term momentum stand out."