Record 15 mainland brokers post losses

PUBLISHED : Saturday, 16 July, 2011, 12:00am
UPDATED : Saturday, 16 July, 2011, 12:00am


Mainland brokerages took a beating from the stock market downturn in the first half of the year, with a record 15 securities firms posting losses.

Some 109 mainland brokerages reported a combined net profit of 26 billion yuan (HK$31.2 billion) between January and June, down 11 per cent from a year ago, according to the Securities Association of China.

The association would not reveal the names of the lossmakers, nor would it say how much they lost or provide reasons for the poor performance.

Only eight brokerages reported losses in the first half of last year.

'The price war on commissions and the poor performance of their own trading accounts were to blame,' said West China Securities trader Wei Wei.

'A heavy reduction in brokerage fees took a toll on some companies.'

To attract more clients, mainland brokerages have been offering huge discounts in trading commissions even though some of them have been losing money.

Revenue from brokerage services usually account for about 60 per cent of total brokerage revenue. Revenues from investment banking and proprietary trading make up the rest.

The number of lossmakers this year exceeds that of 2008, when 12 brokerages reported losses due to a 65.4 per cent plunge in the benchmark Shanghai Composite Index that year.

In the first six months of this year, the index lost 1.6 per cent amid volatile trading and weak buying interest.

Analysts said brokerages' earnings, which were worse than expected, were an ominous sign for the mainland's securities sector, as market sentiment remains weak.

The Shanghai index was the world's third-worst performer last year, slumping 14.3 per cent.

The brokerage sector is deemed one of the most profitable industries on the mainland.

That is thanks to a swelling of trade volumes in the past decade and the government's tightly controlled licensing system.

The 15 mainland-listed brokerages, which posted losses this year, paid their white-collar workers 234,900 yuan each on average last year, six times the general average, according to 21st Century Business Herald.

The first-half earnings were published after the securities regulator started stress tests amid worries of worsening market sentiment.

About 60 per cent of the 100-odd brokerages would suffer losses if the Shanghai index fell below 2,500 points, according to the state-owned Oriental Morning Post. The index closed at 2,820.17 yesterday.


The increase in first-half profit this year by Citic Securities. Earnings rose by 13 per cent from a year ago