Translated by Andrew Vanburen from a Chinese-language piece in Shanghai Securities Journal
CHINA’S LISTED BROKERAGES are having a year to remember, with all of them reporting profits of late.
So who are they and why are they behaving so counter to recent market trends?
Let’s take last month for example, and this is no April Fool’s gag.
Over the 30-day period, the bottom lines of the country’s listed brokerages all were in the black, totaling around 1.52 billion yuan for the month.
Among them, a half dozen had a better April than March, while the other seven saw slight month-on-month declines.
Leading the charge were Mainland China’s top two houses by total assets – Citic Securities Co (SHA: 600030) and Haitong Securities (SHA: 600837).
Guangdong Development Bank Securities and 10 other brokerages rounded out the reporting list.
Those having standout Aprils also included Southwest Securities (SHA: 600369), Pacific Securities (SHA: 601099), Industrial Securities (SHA: 601377), Soochow Securities (SHA: 601555) and Founder Securities (SHA: 601901).
Among them, Southwest Securities had one of the most attention-grabbing months, with an operating revenue of 220 million yuan and a net profit of 110 million.
This compares to a loss of 22.5 million yuan in March.
Shanghai-listed Founder Securities also had a notable April, with its bottom line rising some 35 fold to around 110 million yuan.
But they don’t call Citic Securities top dog in the industry for nothing.
Its operating revenue last month was 810 million yuan, resulting in a 38% sequential rise in the brokerage’s bottom line to 380 million.
This is in rather stark contrast to the valuations of individual listcos in China outside of the brokerage sector.
China’s benchmark Shanghai Composite Index is down nearly 15% from year-earlier levels.
With the likelihood of greater liquidity thanks to lower interest rates going forward, more money is being freed up to feed into the capital markets.
Furthermore, brokerage commissions do a brisk business in volatile times, when daily turnover spikes can occur on a relatively frequent basis.
Therefore, it must be remembered that not all counters are dragged down by a slumping benchmark index.
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