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Hongyuan Securities allowed to expand business scope

(Shanghai Daily)
Updated: 2007-03-14 15:09

Hongyuan Securities Co has won a regulatory nod to manage retail investors' assets and trade up-coming financial derivatives, joining a raft of rivals to ride on state support to the capital sector.

The Shenzhen-listed broker is now allowed to conduct "innovative businesses," which includes asset management and planned derivative trading, the Securities Association of China said in a website notice today.

Chinese authorities are urging bigger domestic brokerages to seek public listings while prompting smaller players to merge as the country acts to shore up the industry's competitiveness before deregulating the market to foreign institutions.

The stock-market regulator started in late 2004 to categorize brokers into four tiers as it tried to halve the participants' number amid an industry overhaul, which is set to be complete by the end of August.

More than 50 brokers now belong to the first two tiers of the category, which are expected to survive the revamp. The other two levels of brokers have either been closed down or are undergoing shareholding restructuring.

Joining in the first level means that Hongyuan will likely be picked as a pioneer for new businesses including stock futures and options.

The broker can also engage in securities lending when the market introduces the business.

China's 120-odd brokers charted a collective profit of 25.5 billion yuan (US$3.29 billion) last year after four years of losses, according to China Securities Journal last month, citing unnamed industry officials.

Profit at Hongyuan skyrocketed 28-fold to about 230 million yuan in 2006 on gains in brokerage fees and proprietary trading, according to its full-year financial statement.

The broker's shares surged 5.60 percent to close at 23 yuan today, extending this year's climb to 89 percent, after it jumped 207 percent last year.