2020 Securities Industry Trend Outlook: Capital Intermediary Business Will Become An Important Force In The New Securities Law Era.

With the revision of the securities law and the promotion of capital market reform, the securities industry will usher in a larger cycle of change.

In twenty-first Century, the economic news reporter learned from the sources of securities dealers that some brokerages are now planning a new capital increase and share expansion plan to cope with the new cycle of capital market reform and active A share trading.

In the eyes of many people in the industry, whether the registration system reform, or the continuous improvement of the two financial balances, or the advent of derivative varieties such as options, have made a bigger test for the capital intermediary business of securities companies.

In this context, the supplement of net capital will become a necessary option for securities companies in the new securities law. Securities firms can further replenish capital strength through horizontal mergers, IPO or refinancing, securities companies' subordinated debt, shareholders' capital increase and strategic investors, so as to cope with the new situation of capital market.

Capital intermediary

As a matter of fact, many key businesses need brokers to strengthen their capital strength. The first thing to bear is the investment banking business under the registration system.

According to the insiders, after the Ke Chuang Chuang submitted a request to the sponsor, the registration system's continuous landing and expansion will further strengthen the test of the securities company's capital strength.

"Ke Chuang Chuang has put forward a demand for securities companies. In the early days of market innovation, although many brokerages have made a lot of money with investment, there will be different trends among Quality Inc after the normalization of post registration system, which means that the vouchers will take greater risks in this business." An investment bank in Shanghai said, "if the IPO market is gradually turned into a registration system, if it lacks sufficient capital strength, it will be even harder for investment banks to receive projects."

"Moreover, under the registration system, there will not be some risk items, so there is a corresponding capital requirement to correspond to a certain amount of advance compensation." The investment bankers said frankly, "under this trend, there will be a 28 opening trend in investment banking, that is, most of the projects are controlled by the head company."

In fact, this trend has been reflected in the IPO project of the science and technology innovation board. According to Wind statistics, as of January 8th, a total of 51 brokerages served 240 companies (including joint sponsorship) in all the listed and queuing companies, and the number of the top 10 companies was 141, accounting for 58.75%. The Matthew effect will be further strengthened in the context of further expansion of registration system and intensification of differentiation of capital strength of securities firms.

At the same time, the expansion of margin trading and market making business will also strengthen the requirements for capital.

On the one hand, the increase in risk appetite under the bull market has increased the demand for credit transactions in the market, and the scale of the two financial balances has also been increasing under this background. Reporter statistics Wind found that the two financial balance has been on the scale of more than one trillion on 14 consecutive trading days since December 18, 2019, and reached a new high of 7 yuan in January 2020, reaching 1 trillion and 41 billion 615 million yuan.

On the other hand, new three board, options, futures and other market makers are also increasing, which will further challenge the capital intermediary business of securities companies.

"For the multi-level capital market and derivatives market, it is necessary for brokers to act as market makers to provide liquidity to better enhance market activity, which will also become an opportunity for brokers to further expand their capital intermediary business." "A large part of the business is obtained through capital intermediary business such as market making," said a non banking financial analyst at a medium-sized brokerage in Beijing.

New period of capital raising or

Although the importance of capital intermediary business of securities companies has been increasing, the financing behavior of securities firms has begun to slow down in recent years.

During the three year capital replenishment plan for the securities industry from 2015 to 2017, the vast majority of brokerages realized net capital replenishment through IPO, refinancing and shareholders' capital injection.

In twenty-first Century, the economic report reporters statistics Wind data found that during the three years from 2015 to 2017, a total of not less than 21 brokerages or brokerages shadow shares had realized 25 additional refinancing, and the total amount of fund-raising amounted to 153 billion 353 million yuan.

In comparison with the two years since 2018, the refinancing progress of brokerages has slowed down. Data show that only three brokerages and brokerages shadow share carry out additional financing, the total fund-raising is only 32 billion 500 million yuan, compared to 2015 to 2016, the total sum of the two years has shrunk to 74.82%.

The securities industry has also shrunk in the IPO market. Data show that since 2018, CITIC construction, Tianfeng, Nanjing, Hongta, Hualin, the Great Wall and Huaxi seven brokerages have been listed on the IPO market, raising 13 billion 298 million yuan in total, compared with 7 brokerages from 2015 to 2016, but at that time the scale of financing was as high as 4.61 times that of the former IPO.

"The slow pace of financing for brokerages in recent two years is mainly due to the fact that securities companies have entered the capital replenishment planning cycle since 2015. At that time, under the guidance of regulators, the securities companies were forced to increase capital and expand their shares." The above non bank financial analysts said, "but after 2018, some brokerages completed the capital replenishment plan, and the regulators' assessment of the supplementary capital of the securities companies began to relax, and the activities of raising capital and offering shares were also reduced accordingly.

But in its view, along with the anticipation of bull market and the advance of capital market reform, the securities industry is expected to usher in a new capital replenishment cycle. However, in the form of expression, it may be more than just starting or refinancing. Mergers and integration in the industry, capital injection by shareholders and issuance of subordinated debt have also become part of the way of thickening the capital strength of some brokerages.

"Although the scale of the initial and additional issuance of brokerages has decreased since 2018, the market is warming, which is conducive to the valuation and financing of brokerage stocks." The above non banking financial analysts said, "at the same time, changes in the industry are also prompting more large brokerages to carry out mergers and acquisitions integration, thereby enhancing the overall capital strength and risk resistance capabilities."

Compared with banks and insurance, the securities industry itself should also be a capital type industry. However, due to the insufficient development of capital market and other historical reasons, the volume of brokers is smaller than that of banks and insurance institutions. However, this trend may be changed under the trend of industry merger and the injection of state-owned shareholders. Huijin securities broker said, "in fact, the current direction of securities company classification supervision is also based on the distinction between capital intermediary business and non capital intermediary business. The comprehensive securities company represented by the head broker must be a capital type organization, and the capital intermediary business will also be the future force."