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China's securities industry pushed to diversify

(China Economic Net)

16:55, November 03, 2011

Edited and translated by People's Daily Online

Beijing, Nov.3 (People's Daily Online) -- China's 17 listed securities companies are facing harsh situations in the third quarter due to the continued drop in revenue from brokerage business and considerable losses on their self-operated business.

Only four of the 17 listed securities companies reported revenue growth in the first three quarters of 2011 from a year earlier and their combined revenue was lower than that of last year. Both the net profit attributable to shareholders and the return on net assets of all 17 securities companies fell in the third quarter from last year, with six companies incurring losses to different degrees.

Almost all 17 companies witnessed a year-on-year drop in the net income from their brokerage business and self-operated business in the third quarter.

Combined annual revenue almost bound to drop

The total trading volume and value on China's A-share market declined by more than 4 percent and nearly 1 percent, respectively, in the first three quarters of 2011 from a year earlier, which directly affected securities companies' revenues from brokerage business and self-operated business. These two types of businesses remain the main sources of revenue for most securities companies.

Only Shanxi Securities reported a slight rise in the turnover of brokerage business because of a surge of 140 percent in net interest income, and the rest of the 16 listed securities firms all recorded a fall in the turnover of brokerage business. Among them, CITIC Securities saw the sharpest decline of 40 percent, followed by GF Securities and Pacific Securities.

Securities brokers will almost inevitably record a considerable drop in their overall operating results for the whole of this year. Hongyuan Securities also said that because its securities brokerage and investment business is the main source of its profits and is exposed to market fluctuations, they cannot accurately predict related operating results for next season.

Strong securities firms explore new business

Leading securities firms with strong comprehensive strength and medium-scale brokerage companies with strong innovation capacity have shown higher risk-bearing capacity thanks to the continued transformation of their business structures and increasingly higher innovation capacity.

Some securities companies have already accelerated their steps of lying out and renovating their businesses in the third quarter. On the one hand, many securities companies have accelerated establishing subsidiary companies to carry out such businesses as the direct investment. For example, the Shanxi Securities Company founded a wholly owned subsidiary company, the Longhua Xifu Investment Company Limited, in July.

On the other hand, securities companies intensively strengthened their investments in the futures business in the third quarter. CITICS Futures, a subsidiary company wholly owned by the CITIC Securities, has already submitted the application to merge with the Zhejiang Xinhua Futures Brokerage Company and is waiting for supervision department to approve it.

"The weak A-share market is a test for the competitiveness of securities companies. Their performances will obviously differentiate according to their competitiveness." Relevant insiders said that, “The transaction business is still the securities companies' main business at this time, but in the long run, as the securities borrowing and lending methods are launched, innovative businesses, including asset management, margin trading and direct investment, will develop more rapidly and bring new development opportunities for securities companies with innovative abilities."

 
 
     
 
 
 
     
 
 
 
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