20 January 2019
Wang Dongming (center) says lower entry barriers will benefit a wide range of players regardless of where they are from and who owns them. Photo: EJ Insight
Wang Dongming (center) says lower entry barriers will benefit a wide range of players regardless of where they are from and who owns them. Photo: EJ Insight

Tighter competition looms in securities industry

China’s securities industry will see tighter competition as some entry barriers come down for foreign players and banks, Citic Securities Co. Ltd. (06030.HK) said Tuesday.

Chairman Wang Dongming expects Chinese regulators to ease restrictions further, benefiting players from a wide spectrum, “regardless of where they come from and who owns them”.

He said financial institutions should step up efforts to sharpen their competitive edge amid growing rivalry in the sector.

Wang made the remarks after media reports that China’s securities regulators will allow overseas firms to own up to 51 percent of domestic joint ventures from 49 percent.

The rule change will allow them to more effectively compete with incumbents such as Citic Securities Co. in Asia’s largest equities market, according to Bloomberg.

The Chinese government has been encouraging domestic brokerages to find overseas partners to improve corporate governance and help speed up market reform.

Also, the China Securities Regulatory Commission (CSRC) is considering allowing banks to apply for securities licences.

Wang said integration of the banking and securities industries is a trend for the future.

“There will be a time when banks and securities firms team up, insurance firms and securities firms team up… when risks can basically be controlled, clients hope to have better integrated services,” he said.

Citic Securities, China’s largest brokerage by assets, reported a 116 percent increase in net profit to 11.33 billion yuan (US$1.82 billion) in the year to December 31 compared with the previous 12 months. 

Revenue and other income rose 94.91 percent to 39.52 billion yuan during the period.

“Our traditional fee-based businesses such as brokerage, asset management and investment banking business recorded significant growth on the back of a strong capital market in China,” managing director Ge Xiaobo said.

The balance of domestic margin financing and securities lending was 72.12 billion yuan for the financial year, making it No. 1 in the industry.

Citic Securities, together with Haitong Securities and Guotai Junan, is under a three-month ban from opening new margin trading accounts after the CSRC found them in breach of regulations prohibiting rollovers of margin trading contracts.

Ge said the suspension will have little substantial impact on Citic’s margin financing and short-selling business.

Demand is robust and the balance grew to about 90 billion yuan from less than 75 billion yuan despite the ban, he said.

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EJ Insight reporter

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