CITIC Securities Co, China's largest publicly traded securities
broker, reported an 800 per cent jump in net profit in the first
half of the year, as revenue was boosted by a market rally in which
the benchmark Shanghai Composite Index gained around 40 per cent
since the start of the year.
Net profit rose to 627 million yuan (US$78.38 million), or 0.21
yuan (2.6 US cents) a share, from 66.2 million yuan (US$8.28
million), or 0.027 yuan (0.3 US cent) a share, a year earlier, the
Beijing-based company said in a preliminary earnings statement
filed with the Shanghai Stock Exchange on Friday.
CITIC Securities' first-half performance beat expectations of
many analysts, yet it is not so surprising, after all, considering
the benchmark Shanghai Composite Index gained around 40 per cent
since the start of the year and daily turnover surged to more than
50 billion yuan (US$6.25 billion) on some days.
"The performance of the brokerage sector closely follows the ups
and downs of the stock market," said Liang Jing, an analyst with
Guotai Jun'an Securities. "In the first half, most of the brokerage
firms have seen their business rebound to profitable levels, driven
mainly by surging broking fees as well as rising earnings on
account trading."
Liang estimated that CITIC Securities posted 1 billion yuan
(US$125 million) in broking revenue in the first half, accounting
for the highest share of the securities broking market, of around 7
per cent.
CITIC Securities reported 1.82 billion yuan (US$228 million) in
total revenue in the first half, almost 10-fold of what it earned
in the same period last year.
Meanwhile, most of the non-listed brokerage firms have released
their first-half results. The Shanghai-based Shenyin Wanguo
Securities Co pulled in 780 million yuan (US$97.5 million) in net
profit, ranking first. Guotai Jun'an, also Shanghai-based, closely
followed with a little more than 700 million yuan (US$87.5 million)
in net profit.
"In the second half, performance in the brokerage sector will
continue to grow yet at a slowed rate as the market rally will find
it hard to sustain because of the overheating economy, which
signals heightened policy tightening and a slew of new share
offerings that will divert capital," Liang said.
"Apart from broking and trading on accounts, the brokerages will
look to investment banking business to gain profit."
CITIC Securities, for instance, has confirmed it will underwrite
the A- and H-share offerings of the Industrial and Commercial Bank
of China. CITIC Securities stock rose to 15.36 yuan (US$1.92) per
share in the early morning on Friday, hit the limit for the day on
the preliminary earnings statement. It closed at 14.49 yuan
(US$1.81), up 3.80 per cent from Thursday's close.
China's stock market, mired in a four-year slump, has staged an
impressive rally since the beginning of the year, as regulators
conducted a share reform converting about US$250 billion in
State-held non-tradable shares into regular trade equity and lifted
a ban on new share sales in May, a year after initiating the
reform.
Yet on concerns of a stream of upcoming new share offerings,
excessive money liquidity and accelerating growth in the gross
domestic product, the benchmark Shanghai Composite Index corrected
itself downward since June by slumping by more than 5 per cent on
June 7.
(China Daily July 22, 2006)
