A Survey Of The Securities Industry In The "Epidemic Reform": Dividends And Tests Come At The Same Time.

Under the anticipation of capital market reform, the securities industry is quietly moving forward.

In the outbreak of the new crown pneumonia epidemic, the performance of brokerages in the first month of 2020 surrendered a satisfactory answer to the market. In the 60 brokerages who disclosed monthly data (including professional subsidiaries), the single month profit growth rate was close to 30% year-on-year, and this consensus seems to be gradually forming in the future.

In twenty-first Century, the economic report reporters found that the bull market expectations of a series of capital reform and market activity, represented by the registration system, are bringing huge institutional dividends to the securities industry; the change of online channels brought by the impact of the epidemic, as well as the polarization caused by industry classification management, are accelerating at the same time.

An era of greater opportunities and uncertainties for the securities industry has arrived.

First of all, along with the acceleration of online transformation, the role of physical channels may be declining in the securities business, which will further strengthen the Matthew effect and merger and integration of the securities industry; secondly, with the loosening of more innovative businesses and the rules of compliance with the registration system reform, the market's demand for industry capital will also take a new step. With the fruits of the current reform, the industry also maintains a higher degree of vigilance on the risk points that may induce policy risks, such as leverage instruments, market volatility and so on.

Online Evolution

The outbreak of the new crown is further stimulating the deepening of the securities business online.

"After the outbreak, we are actively guiding customers to adopt the off-site approach to business. Now, except for the two fusion, options, first opening of the gem and other businesses, most of them do not have to deal with the cabinet." A manager of a brokerage office in East China said, "some wealth management lectures and product promotion activities in the sales department have also been put into the live platform to interact."

In the course of the epidemic, this phenomenon is not isolated in the securities industry. According to the twenty-first Century economic report reporter, whether it is investment roadshows, strategic meetings, business training, or wealth management, customer service and authority handling, all are carried out online.

"The emergence of the epidemic itself will not stimulate the demand for online channels in the medium and long term, but a real problem it brings is that it will affect users' usage habits. For example, whether permission processing, service or product sales can be completed efficiently through online, customers may find this better." A former head of the securities brokerage business manager said, "although the former customers online transactions, but industry exchanges, specific business management is still accustomed to offline, they have not tried online, and this epidemic has given online opportunities."

"The securities industry itself is very high degree of online, more than 95% of the transactions and accounts are almost completed online, and this epidemic has prompted this trend to further deepen, but this opportunity will also be left to the prepared institutions, before the layout of a larger number of brokers, in this situation will also be very rapid transformation." A medium-sized brokerage firm in Beijing, a non bank financial analyst, said, "for example, if you want to do live interactive windows for customers, then the IT capable institutions will be resolved in a very short time, and the ability of their service users will also show faster, so this epidemic is a good thing for the former IT stronger broker."

The online business of some businesses is indeed becoming a competitive advantage.

For example, the ability to open new three boards for qualified investors online has undoubtedly become the comparative advantage of some brokerages.

"Before the new three boards must be double checked, but starting from this year, the new three board accounts can be launched online, and the new three boards will soon usher in a stratified reform, so some investors have a relatively high enthusiasm to open accounts." Huijin Department of a brokerage business department responsible person said, "but not all brokers are ready to handle three boards on line preparation, and some can only deal with temporary cabinets."

"At the time of this outbreak, if the broker can not provide online processing, it is likely that the customer will turn his assets to other brokerages that can provide online processing in order to reduce the risk of going out." The official said, "although the new three board accounts require two years of investment experience, this can be based on the time of opening the account. The potential customers of the new three boards can choose to open a new brokerage account and wait for the asset conditions to meet the standards to open online."

The test of pricing

The left hand must face the epidemic directly, and the right hand is putting on a set of reform chess.

Yan Qingmin, vice chairman of the securities and Futures Commission, said that the direction and determination of comprehensively deepening the reform of the capital market will not change because of the outbreak of the epidemic. With the landing of the securities law in March 1st, the anticipation of registration system reform has been formed.

The market seems to be laying the groundwork for reform with heat.

In the 10 trading day from February 19th to March 3rd, the A share market broke through 1 trillion for ten consecutive days. In February, the total turnover of A shares reached 19 trillion and 480 billion, which is close to the November level in 2015.

In fact, including registration system reform, a series of system loosening from refinancing, merger and reorganization, to delamination of new three boards, and the reduction of new regulations are regarded as a positive benefit of the securities industry. After the adjustment in February 3rd, the securities index of China Securities has risen 20.68%, which is 11 percentage points higher than that of the Shanghai Composite Index.

"Registration system will bring benefits to broker dealers in investment banking and market making." The above non bank analysts said, "more enterprises' listing expectations will be an important window for the development of these businesses, and the development of options and OTC derivatives will also expand the source of revenue for brokerages."

However, according to many investment bankers, the registration system reform to normalize operation will bring more intuitive test to the risk pricing ability of securities companies.

"The motherboard market has been asked to control 23 times (price earnings ratio), and the distribution of the science and technology board has been robbed of the sky, but these are all the results of the IPO limited price fixing and the initial speculation of the science and technology board." A head broker of Shanghai Bao Dai said, "for different companies, different industries, different underwriting agencies, the difference between the pricing power and the difficulty of the exhibition industry is not reflected, but it will still come."

"Compared with mature market institutions, domestic brokerages have not grown enough in terms of pricing and sales capabilities, and sponsor underwriting has become a" material business ". Bao Bao pointed out above.

"Once the supply of new shares increases, the phenomenon of the new lottery and the overvalued pricing will change now, but many practitioners are immersed in the industry inertia as long as the issue is subscribed." The above insurance agent frankly said, "some small and medium-sized teams are trying hard to get the list, but this is actually spoiled by the distorted IPO system for a long time."

In its view, the test of registration reform will further squeeze the survival space of small and medium brokerages.

"Limited price limited release, in other words, is eating a licence plate, but in the registration system, the role of the license is becoming smaller and smaller, the real pricing and matching ability is more critical." "IPO is still a seller's market, but for the weaker group of small and medium-sized securities companies, the difficulty of investment banking may suddenly increase at a time when supply and demand turn around," said the insurance company.

Some analysts expect that no matter whether the channel is online, the loosening of innovation business, or the marketization pricing of investment banking, there will be two major trends. One is to strengthen the demand for capital for securities companies, the two is to aggravate the polarization of the industry.

"New business needs capital investment, whether it is online system construction or the capital demand brought by innovation business, which requires securities companies to maintain capital expansion capacity matching market size." The above non bank analysts said, "in order to solve these problems, some head brokers may further carry out industry mergers, and the situation of small and medium brokerages lacking in capital or professional degree will be more and more difficult."

To be very careful

In strengthening the Matthew effect of the industry, reform itself is also faced with policy risks.

"Registered production is an important measure to adjust the financing structure. It must be pushed. But in this process, maintaining market stability is a necessary condition." A securities brokerage executive close to the regulator said frankly, "from the perspective of many reforms in history, the independence of policy is always beset by market shocks."

From the historical perspective, many institutional reforms in the capital market are inevitably constrained by market factors.

For example, in 2008, asset securitization, which had gradually moved from pilot to normal development, was suspended by regulators at the impact of the financial crisis in the United States. By the end of 2012, the IPO business had been halted by the SFC due to breakage and other phenomena. In 2015, the A share market shock led to the delayed registration system reform, and the strategic emerging board at the time of the Shanghai Stock Exchange's preparation. It was also miscarried.

"In fact, the reform of this section is related to the relative low value of the A share market in some degree." The securities executives close to the regulators said, "because of the high position and high valuation, the market is in a state of great volatility or instability. It is very easy to bring about the impact of the reform, just like if last year's science and technology board was launched, once the first batch of the company's share price broke out, it would be very ugly and not conducive to the reform."

Some analysts pointed out that once the valuation of the A share market in the coming period of rapid uplift or concussion, it will induce policy risk. Wind data showed that the technology based gem was only 48 times the rolling price earnings ratio at the end of the two quarter of 2019, and it has risen to 59 times as of March 4, 2020.

"Although market valuation is still at a historical low level, if the A share market is active and fast rising, the valuation will also rapidly increase, which will accumulate risks to a certain extent. If the market shocks dramatically, it will have a potential impact on a series of reforms such as registration system." Aforementioned non bank financial analysts said, "the 2015 stock market crash and rescue is a lesson. Recently, some technology stocks have been showing signs of this."

"Because the market tool is bullish on the whole, the risk of rapid rise is small, but the sharp fall is easy to trigger the breakage of the financing lever." The above securities executives also said, "we must be vigilant against the market situation of sharp rise and fall, which may be harmful to the reform."

The runaway of leveraged tools such as off site capital allocation is regarded as the biggest shock in 2015. Compared with the original, the size of the A share market is still limited, but the industry believes that it is still vigilant against this potential chaos.

"Because the market is relatively hot recently, some of our customers have already reflected that they have received more distribution calls. We have made risk hints to all customers in accordance with the internal requirements and using the pop-up page of the client." The above East China Securities Business Department official said.

Whether regulators or industries, they want to control the rhythm of the current, ensure that the leverage of the leverage is reasonable, and the best way is to make the best use of water. No matter how the market changes, it is the right way to gradually guide incremental capital to enter the market steadily. The securities executives said frankly.

?