What’s new: Guotai Junan Securities Co. Ltd. (601211.SH) won approval from China’s securities regulator to sell as many as 50 billion yuan ($7.7 billion) of corporate bonds, the brokerage said Tuesday.
Guotai Junan will sell the bonds in batches, offering the first batch within a year and the rest within two years, the brokerage said.
The company joined a series of brokerages selling bonds recently. As of Tuesday, Chinese securities companies issued 69 bonds this year, raising a total of 185.92 billion yuan. Brokerages sold 875.28 billion yuan of bonds in 2020, almost double from the previous year.
The background: Brokerages rode China’s bull stock market in 2020. The SSE Composite Index rose nearly 14% in 2020, and the trading volume on the Shanghai and Shenzhen stock markets increased 62% year on year.
In the first half of 2020, the securities industry’s net profit grew 25% to 83.1 billion yuan, exceeding profit for the whole year of 2018. The industry is expected to achieve a 30% jump in 2020 earnings. The booming profits help lower brokerages’ financing costs.
Compared with their global rivals, Chinese securities companies have a relatively low leverage ratio, according to Yuekai Securities Co. Ltd. In 2020, China’s securities industry had an average leverage ratio of 3.06%, compared with at least 10% among global investment banks, Yuekai’s research team estimated.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).
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