Chinese Brokerages Benefit From Stock Market Rally
China’s securities brokerages posted sharp profit increases last month, fueled by the A-share market rally.
Among publicly listed brokerages that released June results, 36 reported combined revenue of 28.7 billion yuan ($4.1 billion), up 86% from May. Net profits grew 78% to 11.3 billion yuan. A 37th brokerage whose results weren’t included is Zhongtai Securities Co., which just went public last month without comparable data.
The market rally helped securities companies’ brokerage and proprietary businesses. The CSI 300 Index, a gauge of China’s biggest stocks, surged 7.7% last month. The tech-heavy ChiNext Index was up 16.9%. Average daily turnover in June increased 16% from May to 772.3 billion yuan. Initial public offerings last month also surged 63% to 26.1 billion yuan.
Twelve brokerage companies reported revenue of more than 1 billion yuan. The top three ― Citic Securities Co. Ltd, Guotai Junan Securities and CSC Financial Co. Ltd. ― all topped 2 billion yuan of revenue. The three biggest brokerages more than doubled their profits in June.
Smaller companies posted even bigger percentage profit gains from May. Shenzhen-based First Capital swung to profit of 64 million yuan from a loss of 36 million yuan. Northeast Securities Co. Ltd. and HuaAn Securities Co. reported profit growth of more than 400%.
Not all brokers profited amid the rally. Seven enterprises reported earnings declines, including two that posted losses. Hongta Securities Co. reported a loss of 89 million yuan, and Central China Securities, a loss of 4 million yuan. Haitong Securities, one of larger brokers, had a 36% monthly decline in profit.
Stocks of brokerages also surged. Shares of seven securities businesses jumped more than 50% this month. Zheshang Securities Co. Ltd.’s stock nearly doubled. Shares of Everbright Securities Co. Ltd. rose 87% and of First Capital, 75%.
Market valuations of brokerages are in an extreme range compared with historical prices, said Wang Hanfeng, chief strategist at China International Capital Corp. Brokerage stocks are trading at a price-to-book value of 2.48, compared with the median of 1.93 for the past 10 years, data shows.
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