NewChinese brokers brace for consolidation

In the shoals of China's little-known stockbrokers, fast-growing firms like Southwest Securities may soon find themselves in the glare of a consolidation spree triggered by Beijing's drive to modernise the financial industry.

Nearly doubling profits last year on a stock market boom, Southwest is one of the more than 120 Chinese brokerages that will have to live with government plans to allow commercial banks and other finance firms to own a brokerage licence. The new rules are expected later this year, part of moves to open up the country's capital markets and bolster economic growth.

After a stellar 2014 - securities firms' profits more than doubled to US$16 billion - brokerages are now bracing for the impact of newcomers by lining up to raise funds to expand margin trading and other businesses. A series of takeovers is about to be unleashed, insiders say.

"Mergers between banks and securities companies, insurers and banks, or insurers and securities companies are all likely to show up," said Wang Dongming, the chairman of Citic Securities. "The strong will become stronger, and the weak will become weaker."

Securities firms had about 4.1 trillion yuan of assets last year, nearly double a year earlier, according to the Securities Association of China.

Brokers' assets and earnings were boosted by stock trading volumes rising to a record high as local investors flocked to equities after the central bank's surprise interest rate cut in November. Volumes have also been helped by the Hong Kong-Shanghai stocks through train scheme, which opened the same month, allowing cross-border trading of shares.