CITIC Securities Results: Set for Rebound?
CITIC Securities results hint that China's stock market downturn could be near an end, with a better than 50 percent chance of a sustained rally starting by year end.
While the profit drop certainly wasn't very pretty, it was still a big improvement over the 36 percent profit decline the company reported in the first quarter; and after doing some quick math myself, it looks like the company's profit declined a relatively benign 17 percent in the second quarter, or about half the rate of decline from the first quarter. More broadly, Chinese securities brokerages reported a 6 percent revenue decline in the first half of the year, according to an industry association, again reflecting the weak state of the stock market.
China's stock markets rallied early this year, but I predicted the rise would be short-lived because it appeared the surge was being largely fueled by speculative money provided by Chinese banks who were trying to boost their lending. So the question becomes: Now that the early-year bubble has burst, is it time for a more sustainable rally?
CITIC Securities results seem to indicate that investors are slowly starting to return to the market after fleeing earlier this year. Bargain hunters are certainly an important part of this equation, as domestic buyers eye valuations that are quite low.
But equally important is a new flood of foreign money coming into China's stock markets as Beijing opens the country's financial markets wider to overseas investment. The government has recently been approving a steady stream of new quotas for big foreign investors under the nation's Qualified Foreign Institutional Investor (QFII) scheme, providing an important new source of money to boost demand for Chinese stocks.
Bottom line: CITIC Securities results hint that China's stock market downturn could be near an end, with a better than 50 percent chance of a sustained rally starting by year end.
