Chinese brokerages are in a race to raise billions of dollars in capital to meet regulatory requirements, jumping on a market upturn to bolster operations as they brace for tougher competition from Wall Street banks on their home turf.
At least six listed brokerages - including China International Capital Corp
The brokerages need fresh capital to meet Chinese risk management rules, and finance capital-intensive businesses such as margin financing and market-making, having weathered volatile markets in the last couple of years. The sector saw a 19% profit slump during the first nine months of 2022, according to the industry association.
"The market revival is good news for brokerages as they can choose to sell additional shares at a better price," said Xia Chun, chief economist at Shanghai-based wealth manager Yintech Investment Holdings. The brokerages traditionally make money mainly from trading commissions, underwriting fees and propriety trading. Many are now expanding into more stable businesses such as wealth and asset management."For big share placements, existing shareholders need adequate cash to participate. Some would choose to sell" rather than buy, said Liam Zhou, founder of Minority Asset Management Co.
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