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China has most of world’s biggest brokerages as deregulation, stock rally, merger prospect fuel upsurge

  • China has six of the world’s 10 most valuable brokerages, including Citic Securities and CSC Financial, while the US owns three
  • Chinese brokerages have been on a roll as regulators cut trading barriers for small companies, stocks rally and prospects of an industry consolidation mount

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An investor sits next to a stock quotation board at a brokerage office in Beijing. Photo: Reuters
Zhang Shidong

China now boasts more of the world’s top investment banks than any other country, as a slew of reforms aimed at deregulating the sector, a surge in share prices and hope of industry consolidation send market capitalisations soaring.

Six of the 10 most valuable brokerages come from the Asian nation, with the US taking three spots in the ranking and Brasil having the remaining one, according to Bloomberg data. The six Chinese firms include Citic Securities and CSC Financial, which are ranked third and fourth place with a market cap of at least US$51.7 billion. Morgan Stanley and Goldman Sachs are still the biggest, capitalising at a minimum US$72.4 billion.

Traders have been betting on Chinese brokerages, a barometer of market sentiment. Stocks have rallied after China emerged from lockdown during the coronavirus outbreak. Regulators are allowing a wider daily trading band for stocks on the ChiNext in a sign of further relaxation. And investors are optimistic that more government-led mergers will be in the offing.

China’s economic transition “will need more direct financing and brokerages will benefit from the rising status of the capital market,” said Zuo Xinran, an analyst at Founder Securities. “The sector is expected to maintain rapid profit growth in the second half and retain the investment values.”  

Chinese brokerages are already benefiting from a stellar run on the nation’s US$9.6 trillion stock market this year, which has buoyed up the daily trading values close to the all-time high and leveraged stock purchases to their highest level in five years. The benchmark Shanghai Composite Index has gained 11 per cent so far this year, beating any world’s major equity gauge. It is also the only major benchmark that has not slipped into bear-market territory amid the Covid-19 pandemic.
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