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April 13, 2016

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Brokers double earnings in March

CHINA’S listed brokerages saw their earnings almost double month on month in March as increased trading activity boosted their commission revenue, industry data showed.

The combined operating income of 23 firms rose 99 percent from February to 25.4 billion yuan (US$3.9 billion), according to their own figures.

Their net profit for March jumped 166 percent month on month — though fell 11 percent year on year — to 13.1 billion yuan.

“Recovering trading turnover amid a market rebound last month contributed to the growth of brokerages’ proprietary businesses and commission revenue,” said Yang Rong, an analyst at China Securities.

After a turbulent start to the year, China’s stock markets rebounded last month with the Shanghai Composite Index and Shenzhen Component Index gaining 12 and 15 percent, respectively. The volume of shares changing hands in the month rose 72 percent from February to 13.4 trillion yuan, which boosted brokers’ commission income significantly.

Pacific Securities fared best of all in March, posting a 20-fold rise in net profit, while Industrial Securities, CITIC Securities and Orient Securities all saw 10-fold increases.

In contrast, Guotai Junan Securities said its March net profit fell 31 percent, the only brokerage to report such a decline.

Analysts said they expect the planned easing of risk management rules to boost growth potential in the sector.

China’s securities regulator said last week that it is planning to lower brokerages’ net assets to liabilities ratio to 10 percent from 20 percent, and their net capital to net assets ratio to 20 percent from 40 percent.

“Easing capital requirements will encourage the sector to develop new business lines and revenue sources,” said Haitong Securities’ Sun Ting.


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