Chinese brokerage profits slump 55pc in 2016 as trading volume shrinks

China’s brokerage houses saw aggregate net profit fall by half in 2016, and only a handful of mainland-listed brokers reported declines of less than 50 per cent, owing to shrinking trading volume after a bumpy ride for mainland shares in 2015.

The net profit of China’s securities companies in 2016 dropped 55 per cent year on year to an aggregate amount of 110 billion yuan, Hong Jinping, analyst at Hua Chuang Securities said in a research report after calculating brokers’ monthly disclosures last year.
That compares to an explosive 153 per cent profit growth to 244.8 billion yuan in 2015 as a rally in mainland shares in the first half of 2015 boosted share trading, according to public information from the Securities Association of China.

The Shanghai Composite Index lost 12.31 per cent in 2016, its biggest yearly drop since a 21.7 per cent fall in 2011, to rank as the world’s sixth worst-performing stock market.

Among the bright spots, investment banking will become the driving force for mainland brokers in 2017 as Chinese regulators accelerate approvals for initial public offerings.

CITIC Securities, the largest securities firm in China, and listed both in Hong Kong and Shanghai, was on track for a 7.53 billion yuan net profit in 2016, according to combined statistics of the broker’s monthly releases. That represents a year-on-year profit drop of 50.2 per cent.