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Brokerages forced to meet new realities
By Verain Ye |
November 27, 2012, Tuesday
|
Print Edition
Print Edition
CHINA'S securities brokers are forced to expand their product scope and services because intense competition, and regulatory changes are hitting their profitability, a survey showed yesterday.
Brokers are facing growing pressure and challenges amid stiff market competition and are studying how to widen their product offering and services, especially in a sluggish stock market, KPMG said in the survey of 109 brokers in China.
"China's brokerage business needs to shift from a traditional trade execution model to an integrated financial services one, including providing investment advisory and wealth management businesses, in order to achieve sustainable growth," said Bonn Liu, partner with KPMG China.
The sector suffered an annual 50-percent tumble in combined net profit to 39 billion yuan (US$6.3 billion) in 2011, while gross operating revenue fell 29 percent year on year to 136.3 billion yuan, the survey showed.
Last year, brokerage income shed 36 percent amid dwindling trading volume and a commission price war, while earnings from proprietary trading slumped 77 percent amid a sluggish stock market. Income from underwriting and sponsorship eased 10 percent.
Regulatory changes also require brokers to adjust to meet the new realities.
"As China continues to further enhance its reform efforts, it will expedite the development of a multilevel capital market and promote more innovation of financial products in a bid to deepen and broaden its capital market," Liu said.
Reforms such as a refinancing mechanism for margin trading and short selling and extending investment scope for brokers' proprietary business have been unveiled.
Brokers are facing growing pressure and challenges amid stiff market competition and are studying how to widen their product offering and services, especially in a sluggish stock market, KPMG said in the survey of 109 brokers in China.
"China's brokerage business needs to shift from a traditional trade execution model to an integrated financial services one, including providing investment advisory and wealth management businesses, in order to achieve sustainable growth," said Bonn Liu, partner with KPMG China.
The sector suffered an annual 50-percent tumble in combined net profit to 39 billion yuan (US$6.3 billion) in 2011, while gross operating revenue fell 29 percent year on year to 136.3 billion yuan, the survey showed.
Last year, brokerage income shed 36 percent amid dwindling trading volume and a commission price war, while earnings from proprietary trading slumped 77 percent amid a sluggish stock market. Income from underwriting and sponsorship eased 10 percent.
Regulatory changes also require brokers to adjust to meet the new realities.
"As China continues to further enhance its reform efforts, it will expedite the development of a multilevel capital market and promote more innovation of financial products in a bid to deepen and broaden its capital market," Liu said.
Reforms such as a refinancing mechanism for margin trading and short selling and extending investment scope for brokers' proprietary business have been unveiled.
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