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Expert: Market forces to squeeze China's securities sector

(Xinhua)
Updated: 2007-07-31 08:53

Market competition should drive the number of Chinese securities firms from 104 down to 30 to 50, says leading economist Wu Xiaoqiu.

Revenues generated by commissions on securities trading, driven by the booming stock market, rocketed to more than 80 billion yuan in the first half as against 460 million yuan in 2005, with 83 major firms earning 481 million yuan last year.

As commission revenues were the main income of securities companies, market fluctuation had easily pushed them into tight corners in 2005, when the stock market kept fell, said Cao Fengqi, director of the Research Center for Finance and Securities of Peking University.

Brokering, underwriting and investing were traditionally the three main businesses of securities companies, but small and middle-sized firms lacked the money to cannot afford to the latter two operations, Cao explained.

High commission revenues, generated by daily turnover of 200 billion yuan, were unusual and unsustainable as the stock market would stabilize and turnover would drop to about 100 billion yuan, said Wu, director of the Financial and Securities Institute of Renmin University.

Securities companies would go through a long, cruel and market-determined integration process based on core competitiveness, Wu said.

Companies could expand their revenue channels by integrating listed companies, underwriting and investing, Wu said.

However, small and medium-sized firms could focus on local clients and improve service quality to survive, Cao advised.

Chinese companies should realize that integration was a natural process and learn how to merge and achieve mutual benefits, Wu said.

The country's securities companies broke away from the banks to become independent in 1994.

In 2004, a campaign waged by the China Securities Regulatory Commission to eliminate securities companies involved in fraud, insider trading and other unethical practices reduced the number from 130 to below 110.


(For more biz stories, please visit Industry Updates)



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