Mainland brokerages see earnings slide 63pc
Market outlook for year ahead remains daunting
Mainland brokerages received a bitter lesson last year, with earnings dropping by nearly two-thirds as a result of a market slump and a dearth of initial public offerings.
The Securities Association of China said the country's 107 brokerages earned a combined 48.2 billion yuan (HK$54.67 billion) last year, down 63 per cent from the 130 billion yuan in the boom year of 2007.
The association said the aggregate number was based on preliminary figures provided by the securities firms.
Analysts predicted securities companies would have to brave more rough weather this year, painting a dire picture for the industry.
'Brokerages won't be able to achieve growth in 2009, with expectations that the stock market will retreat further,' said Bohai Securities analyst Huang Feng. 'They'll have to seek other growth engines to improve earnings.'
The Shanghai Composite Index recorded the worst performance in its 18-year history last year, falling 65.39 per cent.
Since earnings reports for last year are expected be poor, analysts said the indicator would continue to retreat until the faltering economy recovered.
Mainland brokerages saw their profits jump more than fivefold in 2007, riding a 97 per cent market rally as mainland investors booming equities.
Twelve brokerages will report losses, the association said. Combined revenue for all of the companies declined 56 per cent from a year earlier to 125.1 billion yuan.
Brokerage fees declined by nearly 43 per cent as investors cashed out of the market.
The China Securities Regulatory Commission suspended approvals for initial share offerings in September, dealing another heavy blow to the brokerages.
'A buoyant bond market helped the brokerages offset some of the losses in the underwriting business,' said Guotai Junan Securities analyst Liang Jing.
'The income from bond underwriting jumped 100 per cent last year and may continue to increase this year amid the brisk sales of corporate debt.'
The CSRC had been striving to underpin the homegrown brokerage industry as it developed the country's fast-growing capital markets.
A two-year market revamp encouraged brokerages to launch their own initial share offerings in 2007.
However, aggressive expansion plans were not realised.
Everbright Securities, which received approval to float shares last year, said yesterday its profit for last year fell 74 per cent to 3.08 billion yuan.
The company has yet to start the initial share offer process, deterred by weak market sentiment.
China Merchants Securities is also awaiting CSRC clearance to implement its listing plan after being allowed to go public last year.
