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​Securities companies face challenges amid gloomy stock markets

Xinhua Financein CFBOND
2019-01-12 11:40

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There is only one Chinese securities company, Shenwan Hongyuan Securities, who reported growing net profits in December when compared with the previous year as of Thursday, according to Wind, a Chinese data provider.

The top five securities companies who achieved over 10 billion yuan (1.46 billion U.S. dollars) in operating income in 2018 were CITIC Securities, Guotai Junan Securities, Haitong Securities, Shenwan Hongyuan Securities and Huatai Securities.

However, only Guotai Junan Securities and Shenwan Hongyuan Securities revealed a growth in their operating income with 1.06 percent and 15.53 percent respectively. 

Earnings of small and medium-sized securities companies are even more disappointing.

Chinese securities analysts said Chinese securities companies' performances are more dependent on stock markets than others. Thus, they called on Chinese securities companies to focus more on their differentiated services. Also, developing institutional customers could also be a direction for them as brokerage businesses are slowing down under the current stock markets climate.

Even for top securities firms, such as CITIC Securities, they are still falling behind their foreign counterparts in terms of either their net assets or operating income. The operating income of CITIC Securities was 43.3 billion yuan (6.4 billion U.S. dollars) in 2017, only one-fifth of the Goldman Sachs Group, according to data from McKinsey.

The good news is that top Chinese Securities companies are seeking acquisitions of small securities companies nowadays. CITIC Securities, for instance, has just accomplished a buyout of Guangzhou Securities on January 9. More cases are predicted to happen in the coming years. But, the process might be slow as securities companies' operating licenses are rare as they are difficult to obtain, said Huang He, an analyst at the McKinsey.
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