Citic Securities Co. has become the world’s fourth-largest securities firm by market value, as China’s stock rally lures new investors and bolsters trading fees.
The CHART OF THE DAY shows Citic’s market value has about doubled in the past month to $55 billion as of Dec. 19, surpassing Credit Suisse Group AG (CSGN) and approaching UBS Group AG (UBSG), data compiled by Bloomberg show. The lower panel tracks the shares of Citic and top-ranked Goldman Sachs Group Inc., normalized starting from June 18. The comparison excludes firms such as JPMorgan Chase & Co. that derive at least half of revenue from commercial banking.
Citic’s shares surged 153 percent in Shanghai this year as the benchmark index’s 47 percent climb prompted investors to open new trading accounts and almost tripled loans taken out to finance equity purchases. Citic reported net income of 886.2 million yuan ($142 million) for November, 11 times higher than a year earlier.
“We might see a few major Chinese securities firms ranking
within the top 10 globally,” said Leon Qi, an analyst at Daiwa Securities Group Inc. in Hong Kong. “Major Chinese securities firms started a business model transformation since 2013, driven by multiple lines of new products, especially the lending-related ones.”
The profit outlook for Citic and its peers has brightened as individual investors opened almost 900,000 accounts to trade stocks in the week ended Dec. 12, the most since November 2007. The value of outstanding margin debt in China climbed to a record 987.9 billion yuan as of Dec. 18 from 335.9 billion yuan a year ago, data from the Shanghai and Shenzhen bourses show.
While Templeton Emerging Markets Group fund manager Mark Mobius believes the bull market in Chinese stocks is just starting, the nation’s securities regulator and state media including the People’s Daily have this month sought to highlight the risk of equity investments to investors.
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