Beijing cuts broker fees 20pc to shore up market

PUBLISHED : Saturday, 21 July, 2012, 12:00am
UPDATED : Saturday, 21 July, 2012, 12:00am


Beijing will cut brokerage trading fees by 20 per cent to bolster the weak market, following a 25 per cent reduction last month.

The China Securities Regulatory Commission (CSRC) told a media briefing yesterday that the additional fee cut was expected to take effect on September 1, according to the official Securities Times. The move was aimed at shoring up investor confidence, the newspaper said.

The Shanghai and Shenzhen stock exchanges and the clearing house have slashed trading fees imposed on brokerages since June 1, saving them about three billion yuan (HK$3.69 billion) a year. Brokerages directly benefited from the cuts, and analysts said they should flow on to retail investors later.

The CSRC told the briefing that the reduction should eventually benefit investors, without elaborating.

Analysts believed the regulator would use its administrative powers to force brokerages to cut brokerage fees that they charge retail investors. Brokerages' transaction fee payments to the exchanges and clearing house are included in the commissions they charge their clients.

The announcement by the CSRC was made after the benchmark indicator crashed below last year's close.

The Shanghai Composite Index was among the world's worstperforming indicators between 2010 and 2011.

Mainland investors have lost their confidence in equity investments although CSRC chairman Guo Shuqing has been striving to talk up the market since taking office in late October.

'It is a fresh message sent to investors that the regulator is concerned about investors' losses,' said Essence Securities analyst Liu Jun. 'While it's a small boost to the market, the psychological effect is important.'

The CSRC also published draft guidelines on strengthening mutual fund houses' internal controls, which analysts said was a signal to investors that it would step up efforts to protect their interests.

More than one-third of retail investors lost at least 30 per cent of their equity investments in the first half of this year, a recent survey by internet portal Sina showed.

Citic Securities, the mainland's biggest brokerage, said yesterday its first-half earnings dropped 24 per cent to 2.25 billion yuan owing to shrinking turnover in the weak market.