Global ratings firm Moody’s raised its rating outlook for South Korean securities firm Mirae Asset Securities from negative to stable, forecasting that regulatory measures by the financial authorities will likely curb the growth of the company’s risky assets.
“The change from negative to stable takes into account Moody’s expectation of slower risk asset growth as a result of various prudential regulatory measures implemented by the Korean Financial Supervisory Service and Financial Services Commission,” said the ratings agency in a statement, affirming the credit rating of the Korean stockbroker at Baa2.
The regulators have adopted a series of regulations and guidelines for the past year or so to curb Korean stockbrokers’ risky assets, including contingent liabilities on real estate projects, structured notes and alternative investments.
Mirae Asset Securities’ Baa2 issuer incorporates its Ba1 standalone assessment and a two-notch uplift based on Moody’s assessment of a high likelihood of government support for the company in times of need, and its very high default dependence on the Korean government, the ratings agency explained.
The Ba1 standalone assessment reflects, among other considerations, the company’s strong franchise as the largest securities firm in Korea in terms of assets and its relatively modest and volatile earnings due to sizable investment assets.
The ratings company’s assessment of a high level of government support reflects the brokerage firm’s size and importance in the Korean market and potential support from state-run financial organizations, including the Korea Deposit Insurance Corporation, to ensure financial stability in the nation.
The upgrade from negative to stable came after the securities firm’s credit rating outlook was evaluated as stable by S&P Global in late April.
Moody’s said it could upgrade Mirae Asset’s ratings if the stockbroker achieved a sustained increase in the proportion its of long-term funding, increased profitability and reduced volatility, among other conditions.
Moody’s also changed its rating outlook for brokerage firm Korea Investment & Securities from negative to stable, citing its relatively strong and stable profitability and its moderate funding and liquidity profiles.
By Kim Young-won (firstname.lastname@example.org