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Brokerages net profit plunges 64% on weak stock markets

NET income at China's 106 brokerages plunged 64 percent from a year earlier to a combined 49.1 billion yuan (US$7.2 billion) last year, due to the sluggish stock market.

Their revenue dived 56 percent on an annual basis to 139.2 billion yuan in the period, according to data compiled by Shanghai Securities News.

A total of 63 companies reported losses in the change of fair value regarding their investments that resulted in a 25.4-billion-yuan loss for the whole industry, and investment income for the industry slumped 59 percent in the period.

The firms earned 95.1 billion yuan from the brokerage business, a decline of 45 percent from a year earlier, as they tightened their cost control, the newspaper said.

Underwriting fees dropped 18 percent to 7.7 billion yuan, and the asset management business slumped 48 percent to 2.5 billion yuan.

The China Securities Regulatory Commission has suspended new share sales since the country's stock market dived nearly 70 percent last year.

The 10 biggest brokerages, including Guotai Jun'an Securities Co and Haitong Securities Co, earned a total of 31.4 billion yuan, accounting for 64 percent of the whole industry, compared with 48 percent in 2007.

But staff salaries bucked the downward trend of corporate profit by surging 45 percent from a year earlier to 31.9 billion yuan last year, or 290,000 yuan per capita.

Senior executives at these companies earned nearly 1 million yuan on a per capita basis, the newspaper said.

Some analysts attributed the salary increase to huge bonuses rolled over from 2007, which were paid to the employees last year.

The benchmark Shanghai Composite Index hit the peak of 6,124 points in October 2007.

Industry sources said earlier this year that the securities regulator may launch a probe into brokers' compensation after media reports said hefty bonuses were paid to executives and other employees despite a stock market slump.

The regulator also plans to demand that brokers improve their compensation and incentives so that salaries and bonuses are directly tied to corporate profit and market conditions, according to the sources.


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