Chinese A-shares Brokers See Revenue Cut in Half

Some brokers benefitted, however, from IPO activity which remained strong.

Author: Belinda Zhou   

China's 37 public brokerage firms didn't enjoy the gradual recovery of the world's second-largest economy in May when 90% of them saw their profits cut dramatically. 

China A-share listed brokers recorded negative profits growth month-over-month and the total revenue dropped 50% to 16 billion yuan ($2.3 billion) month-over-month in May. Net profits declined to 6.5 billion yuan ($931 million), down 55% from last month.

Except for Zhongtai Securities, those brokerage houses, 38 in total, offer services to mainland China-based companies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange. China A-Shares are also known as domestic shares. 

In May, the Shanghai Composite Index fell 0.27% and the Shenzhen Component Index rose 0.23%, and the Shanghai and Shenzhen 300 Index fell 1.16%.

The prospects for China's securities sector remain positive for year-over-year comparison. More than 20 brokerages saw cumulative net profits grow from January to May this year from the same period last year.

China's securities sector enjoyed asset growth by the end of the first quarter. Assets in securities institutions soared by 14% to 8.83 trillion yuan year-over-year, according to data from the People's Bank of China.

Regulators in China encouraged direct financing in investment banking, which raised the amount of IPO offering and IPO underwriting income. IPO fundraising amounted to 113.2 billion yuan ($16.1 billion) from January to May, a year-over-year increase of 126.72%. Revenues from IPO underwriting for 36 brokerages reached 5.2 billion yuan ($743 million) in the first five months of this year, representing a year-on-year increase of 108%.

For the U.S. IPO market, companies going public in 2020 raised $10.9 billion on the New York Stock Exchange and $12.2 billion on Nasdaq as of the end of last week.