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Domestic brokerage houses with more than 500 million yuan (US$60.24 million) in net assets and a sound three-year track record will be allowed to manage investment portfolios for public investors to widen their business.
The China Securities Regulatory Commission is working on a new regulation that is expected to ease restrictions on the brokers' asset management business so that they can help manage investments in stocks and bonds for the public, reported the China Securities Journal yesterday, without citing its source.
"That will add a new source of revenues for Chinese securities firms, which have been struggling through harsh times," leading to shrinking revenues from the stock broking and investment banking businesses, said Zhang Qi, an analyst at Haitong Securities Co Ltd.
The securities regulator would permit brokers to sell to the public units in a so-called "collective investment scheme" through commercial banks, which would transfer the capital pool to securities firms to invest in stocks and bonds.
Each investor will be required to inject not less than 500,000 yuan into the investment pool, with the total size limited to up to 100 million yuan under a single investment scheme, according to the report.
But it did not say when the plan would be fully implemented.
The deregulation is expected to expand the brokers' asset management business, which now targets primarily institutional investors with a capital threshold of roughly 5 million yuan.
"I think that investing in such a scheme would not bear high risks for investors," said Zhang.
The move is a reversal of the regulator's decision in April, which banned brokers from managing the portfolio investment for public investors.
But some broking firms have been doing it because there was no specific policy governing such business.
The move comes after the securities regulator announced early this month that they will be allowed to sell bonds from October.
(Shanghai Daily September 10, 2003)
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