People’s Daily Online: The report says that the upcoming mutual fund recognition scheme between the mainland and Hong Kong and the Shanghai-Hong Kong Stock Connect pilot programme will also provide wider opportunities for securities brokers in China. Does KPMG have predictions for the future scale of this scheme/programme？‪

Abby Wang: Yes, we believe it will provide more opportunities for securities brokers in China, though it is difficult to predict the future scale.

People’s Daily Online: The report says that opportunities and challenges arise from trends such as business diversification and disintermediation, as well as more stringent requirements from regulators. So under the background of business diversification, comparing with other financial institutions, what are the advantages/ disadvantages of securities companies?

Abby Wang: the advantages include: first, the synergy between primary, secondary and OTC markets.

Second, the securities companies have strong connections with fund providers (e.g. banks, SOEs and high-net-worth individuals) and those looking for funds (start-up companies and small and medium enterprises). Third, there is room for innovation and transformation. The regulators have relaxed business restrictions, and industry players are keen to provide innovative products and enter into the internet finance sector.

But securities companies have three weaknesses: the customer base and distribution channels are weaker than those of banks; securities companies have weaker brand influence than those of banks. And their core competitiveness is also weak, needs to improve.

People’s Daily Online: Internet financing industry is growing fast in China, and it is also deeply affecting the traditional financial sector. How should traditional financial sector adjust its development strategy to play to their strengths and to avoid weakness?

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Abby Wang: The traditional finance sector should develop a suitable business model and focus on its institutional or retailing clients, wealth management and internet brokers.

The sector should try to balance existing and new clients. The transaction volume of professional institutional investors (mutual funds, insurance and PE) only accounts for 13 percent of the total volume, which is much less than that in developed countries. Securities companies need to improve their research, pricing and also trading in order to attract more institutional investors.