The way to develop carrier level securities companies: state-owned capital increase + capital intermediary breakthrough

 The way to develop carrier level securities companies: state-owned capital increase + capital intermediary breakthrough

According to securities traders close to the regulatory level, the CPPCC proposal and the above-mentioned measures of the regulatory level are related to the need for a stronger securities industry in the process of capital market reform on the one hand, and the breeding of aircraft carrier level securities operating institutions on the other hand, which will further improve the ability of non-bank markets to prevent and resolve financial risks.

In the view of the insiders, the breeding of aircraft carrier securities companies will make a breakthrough from two dimensions: attracting state-owned capital, social capital injection and expanding the scope of securities business.

Pain of body mass

It has become one of the objectives of the CSRC to nurture the carrier level institutions in the securities industry.

In the reply letter, the CSRC said that in order to promote the building of aircraft carrier level securities companies, it has actively carried out no less than six tasks, including encouraging and guiding securities companies to enrich capital, enrich service functions, optimize incentive and restraint mechanisms, increase investment in technology and innovation, improve international layout, and strengthen compliance risk management and control.

It is worth mentioning that compared with other financial industries such as banking and insurance, or with overseas international investment banks, the biggest pain of domestic securities companies lies in the lack of capital volume.

The securities industry itself was born out of the banking industry, so it is not big by nature. In addition to the industry consolidation and risk events over the years, the leverage ratio of the securities companies themselves has not been opened, and the net capital capacity has not kept up with the development of the market. The key to the problem is that securities companies and the securities industry are too small. The net asset size of a securities company from the first echelon is almost the same as that of the second and third tier city commercial banks, said a broker close to the regulatory level

The size of the industry is insufficient, so the ability to fight financial risks is very limited. In recent years, there have been liquidity risks in the stock market, bond market and stock pledge business, as well as non-bank credit stratification and other events, which have exposed the problem of weak endogenous in the securities industry, said the broker

In its view, the exposure speed of many previous risk events in the securities industry is relatively fast and deep, and we have to introduce assistance from commercial banks, state-owned assets system and other systems. The self-help ability of the securities industry is too poor. In 2015, the listed securities companies collectively invested in the stock market, and as a result, they did not stabilize the market. Finally, they relied on the banks to provide liquidity to the securities companies. In last years stock pledge explosion, rescue funds have been set up to solve the liquidity problem, which is the result of the securities industrys weak strength

Strengthen water diversion

For this pain point, the specific direction of the CSRC to guide the securities industry to strengthen capital strength is also gradually floating, that is to introduce all kinds of state-owned capital to participate in capital injection. In response to the proposal of substantially increasing capital investment in large state-owned head securities companies by combining social security fund, Huijin and CIC , we will actively support all kinds of state-owned capital to invest in securities companies by subscribing for preferred shares, common shares, convertible bonds, subordinated bonds and other ways under the premise of legal compliance, so as to promote the securities industry to become bigger and stronger.

No matter from the proposal or from the statement at the meeting, state-owned capital has become a feasible direction for the investment securities industry. The enthusiasm of private capital to participate in financial investment of securities companies is decreasing in recent years, and the new equity management method of securities companies has added some barriers for private capital to enter the securities industry, said a non bank financial analyst of a medium-sized securities company in Beijing

The introduction of new water sources such as state-owned capital is obviously the most direct way to expand the scale of the industry. Preferred stock, common stock and convertible bonds can also improve the capital strength of securities companies, said the analysts

But in its view, the pure mode of state-owned capital injection is not easy.

The biggest problem of state-owned capital access is also the issue of willingness, unless there is a higher level of financial management or financial sector to coordinate. The above-mentioned non-bank analysts said frankly, in order to solve the problem of bank listing in that year, there was a mode of using external reserves to inject capital, but the same way may not be applicable in the securities industry, because the securities companies face more market risks in the operation level, and the overall valuation level of securities companies is higher than that of banks.

According to wind statistics, as of December 2, the industry average p / E ratio of China securities company was 1.54 times, and the rolling P / E ratio was 25 times, while the average p / E ratio and rolling P / E ratio of banks in the same period were only 0.82 times and 6.5 times, respectively.

If the state-owned capital participates in securities companies at a relatively high price, there will be relatively strict approval of state-owned capital injection. At the same time, whether such capital injection can bring long-term tangible returns will also be considered by the state-owned capital of different systems. A state-owned person who shares in a securities firm pointed out.

The key is to let all parties involved in the injection get corresponding returns, so that everyone can see that this is beneficial. Because neither the financial system nor the state-owned assets are directly responsible for strengthening the securities industry, if they participate in it, they will either have higher-level coordination and policy support, or it will be very attractive.

Business disruption

How to attract state-owned capital or other social capital to participate in the capital increase of securities industry is undoubtedly the key to build aircraft carrier level securities companies.

In the view of some insiders, the way to break the situation is to give the head securities companies more diversified and innovative capital business through classified management of securities companies.

If there are conditions to give the head securities companies more business space and business capacity, it will open up a new growth point for the existing industry, which will inevitably constitute a strong attraction for state-owned capital and social capital. Said an investment banker in Shanghai.

In the reply letter, CSRC also proposed to enrich the service functions of securities companies. Securities companies are encouraged to take customers as the center, activate customers stock assets according to law, develop counter market transactions, pilot credit derivatives, over-the-counter options, cross-border derivatives and foreign exchange settlement and sales, study and promote M & A financing, further improve and deepen asset pricing, risk management and customer-oriented comprehensive service capabilities.

In the view of insiders, this expression means that the space of capital intermediary business of securities companies is expected to be further expanded.

Its not enough for securities companies to have large volume and money. The key is how to use the money and how to help promote the development of the industry. From the development experience of securities industry in mature market countries, large securities companies often rely on a strong capital intermediary to drive their development ability. In short, securities commercial capital plays the role of market maker, counterparty and liquidity provider in the market, which has a natural demand for volume, said the non bank financial analyst

In fact, there is a long way to go to strengthen the capital intermediary for the current securities companies dominated by brokerage business.

The capital expansion and account system innovation of securities companies have always been under a tight spell, that is, the third-party securities account deposit system has been implemented for many years, but at this stage, there are also disputes in the industry whether to pilot to open such restrictions. The analyst said frankly.

In addition, the predictability of regulatory policies also plays an important role in the change of industry pattern.

What kind of attitude will the key regulatory authorities take in the face of capital innovation in the securities industry? In the past few years, the securities business has largely fallen into a cycle of one release is disordered, one receipt is dead The above-mentioned securities traders close to the regulatory level said frankly, the last round of securities firms capital intermediary business focused on stock pledge, resulting in another 18 years of risk. This time, how the regulatory authorities balance the strength of innovation and development and risk control will become a huge challenge.

Source: editor in charge of economic report in the 21st century: Ren Hui, nbj9607