Top Biz News

Nation's securities brokers to be halved

By Zhang Ran (China Daily)
Updated: 2006-07-20 08:57

"Those that can seek outside support to strengthen themselves will stand a chance to survive. Those who fail will have to be purchased by others," said Dong.

He said that acquisitions between security firms would enhance the centralization of the sector's capital and resources, help to lower transaction costs and reduce competition.
"With more than half the players withdrawing from the market, a dozen powerful firms could grow stronger and become the main forces in the sector."

The restructuring of the industry has helped strengthen soundly performing brokers' business, especially after the government resumed IPOs and other capital-raising activities in the domestic stock market, which generate business opportunities for securities brokers.

Twenty-six brokers have disclosed interim reports, with all enjoying gains in the first half of the year.

Up utill July 18, eight leading brokers, including Orient Securities, Huatai Securities, Guodu Securities, China International Capital Co Ltd, Guoyuan Securities, Donghai Securities, Ping An Securities and Everbright Securities, have published 2006 interim reports.

The eight leading brokers demonstrated a combined net profit of 2.1 billon yuan (US$ 262.5 million)  seven times of their combined net profits last year.

To compare, only China International Capital Co Ltd realized a profit gain in the first half of 2005, and others suffered a combined loss of 150 million yuan (US$18.75 million) in the same period.

CITIC Securities, another leading broker, predicted on Monday that it's net profit for the first half of the year will reach around 100 million yuan (US$12.5 million), a 50 per cent increase on the same period last year.

Yi Xianrong, a professor with the Chinese Academy of Social Sciences, however, said the government should not limit the number of qualified brokers to around only 50.

"I suggest brokers should gradually quit the industry. It should be a natural wash out by the market, instead of administrative measures," said Yi.