Liberalization hopes buoy brokerages

China's listed brokerages outperformed last week as the approach of a widely-anticipated conference stoked optimism that regulators will soon introduce policies supporting innovative brokering services.

Brokerages trading on exchanges in Shanghai and Shenzhen saw their share prices jump by an average of nearly 5 percent last week; beating the Shanghai Composite Index, which climbed only 1.27 percent during the same period.

Specifically, Northeast Securities Co surged 11.65 percent to 20.99 yuan ($3.41)； while Everbright Securities Co jumped 7.24 percent to 14.37 yuan; and Founder Securities Co ascended 6.82 percent to 7.68 yuan.

Experts have attributed the gains in this segment of the financial sector to an industry meeting on innovation and development scheduled for May 8, which many market watchers expect will pave the way for brokers to diversify their business scopes, and consequently their revenue streams.

"Securities companies are always eager to offer services beyond trading and underwriting, especially since these services are becoming less in-demand thanks to bearishness in the market and cut-throat competition," an analyst at a Shanghai-listed brokerage, who asked to remain nameless, told the Global Times Sunday.

China held its first such innovation conference in May 2012 to discuss comprehensive reforms to brokering, investment banking, asset management and financing within China. Soon after the event, the China Securities Regulatory Commission (CSRC) introduced policies giving domestic brokers more leeway in terms of the services they could provide their clients.

This year, the market is hoping that authorities will again take further steps to liberalize the brokerage industry once the meeting concludes.

"Generally speaking, innovative services strengthen a brokerage's ability to make money," said Fu Shaoqi, chief investment consultant at Shanghai Securities.

Statistics from the Securities Association of China show that brokering revenues accounted for less than 40 percent of the sector's total revenues in 2012, a year which also witnessed rapid growth in margin trading, securities lending, asset management and related services.

According to Fu, the scale of margin trading and securities lending among local brokerages has been expanding steadily even though conditions in the domestic equity markets have remained lukewarm for most of the year.

For instance, CITIC Securities Co, the largest securities house on the mainland by capital, saw the outstanding value of its margin trading and short sales services hit 8.84 billion yuan last year, up 237.78 percent year-on-year, data from its annual report show.

"After what we saw last year, this year's conference is expected to work out existing problems while also further relaxing controls on the sector," the anonymous analyst said.

However, Xu Yiding, chief strategist at China Minzu Securities, appeared less optimistic.

"Based on the recent regulatory emphasis on financial risk, investors could be disappointed if the conference doesn't open the door to greater loosening. After all, innovation may just hamper efforts made elsewhere to tighten risk controls," he wrote in a note over the weekend.