简 体 繁 体

Central China Securities Sees Higher Profits for Next Two Years

By Bloomberg News

2014-11-05 02:21:31.273 GMT
Nov. 5 (Bloomberg) -- Central China Securities Co., the best performer of mainland brokers listed in Hong Kong, said that improved access to funding will help the company to report higher profits for the next two years.
“Profit will stay at a fairly high level this year” and will be higher in the following two years, Chairman Jian Mingjun, 51, said in an interview last week at the company’s headquarters in Zhengzhou, Henan province, about 630 kilometers (390 miles) south of Beijing. The company plans to sell shares and offshore yuan bonds in Hong Kong next year, he said.
The state-owned Central China, set up in 2002 with the support of Premier Li Keqiang when he was Henan’s governor, has reported profit gains this year and is poised to benefit from a link-up between the Shanghai and Hong Kong stock exchanges. At the same time, the firm’s return on equity has lagged behind competitors and it needs to navigate through a fragmented industry poised for consolidation.
“The strong ones will become stronger while small brokerages are in a disadvantaged position,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research said by phone. Industry consolidation may take “some time” because many brokerages are backed by state capital, Chen said.
Since listing in June, Central China’s shares have climbed 55 percent, outstripping a 3.6 percent increase for the benchmark Hang Seng Index and the biggest gain of four mainland brokerages listed in Hong Kong. Citic Securities Co., China’s largest broker, rose 12 percent.
Profit Gain Central China’s net income rose 34 percent to 179.3 million yuan ($29 million) in the the first half of 2014 from a year earlier. Return on equity was 3.8 percent, the company said.
That was lower than the other three mainland brokers listed in Hong Kong, which had an average of 8.3 percent, according to Bloomberg data. Central China will be able to raise as much as 2.6 billion yuan next year through a trial program that lets 20 brokerages sell short-term bonds, Jian said, adding that the opportunity was a result of being listed. Extra funding has already helped the firm to expand in securities lending and margin financing, which Jian described as “gold mines.”
To boost the industry, policy makers are encouraging such services, with the state-owned China Securities Finance Corp. lending money and shares to brokerages to facilitate margin financing and securities lending. Industry return on equity slumped by 2013 to about one-eighth of 2007 levels, according to estimates by Tebon Securities Co. Return on equity will improve to 8.3 percent this year and 9.9 percent next year from 5.8 percent in 2013, Citic analyst Shao Ziqin estimated in a Nov. 3 note. A resumption of initial public offerings in China and a jump in stock-trading volumes may help. Jian reaffirmed ambitions for Central China to sell equity on the mainland by no later than 2016. The brokerage is one of 89 approved in China to take part in the Shanghai and Hong Kong stock-connect program.