Layoffs hit securities firms

Several leading Chinese securities firms are undergoing a massive wave of layoffs in a bid to survive the bleak stock market by reducing management expenses, insiders told the Global Times Tuesday.

"The situation is not surprising, considering the sluggish stock market this year," a securities industry insider told the Global Times Tuesday on condition of anonymity, noting that surviving the current market has become the top priority for securities companies.

Since the beginning of this year, stock markets in the Chinese mainland have performed much worse than most other markets in the world.

The Shenzhen Component Index declined by 2.69 percent, and the benchmark Shanghai Composite Index fell by more than 5 percent during the first three quarters this year, compared with gains in markets in the US, Germany and South Korea.

According to statistics from the China Securities Regulatory Commission, about 53 percent of retail investors in China had suffered losses in the first nine months this year.

And the Shanghai Securities News reported Tuesday that 1.26 million A-share accounts had shut down between January and November.

"Such a bleak market leaves securities companies with no choice but to cut expenses," said the insider.

China International Capital Corporation (CICC), one of the country's largest investment banks, is reportedly planning to cut employees.

A CICC spokeswoman surnamed Tan refused to comment on the issue when contacted by the Global Times.

Major securities companies, like CITIC Securities, China Galaxy Securities and GF Securities, are mulling adjustment plans that would lay off workers and cut wages, the Shanghai-based China Business News reported Tuesday.

All of the firms declined to comment.

The end of the year is the bonus season in the financial sector, so securities firms may conduct layoffs around this time to save money by eliminating massive year-end bonuses, an economist with direct knowledge of the matter told the Global Times on condition of anonymity.

Li Weidong, research director of investment advisor ChinaVenture, told the Global Times that in the past, securities companies and investment banks have seen expenses grow after they greatly expanded their businesses due to relatively good stock market performance and hot initial public offerings (IPOs).

"But this year, the markets are sluggish and the IPO market has slowed somewhat, which has forced securities firms to cut expenses," said Li.

According to their monthly financial reports, 19 listed securities firms in the Chinese mainland reported a combined profit of 471 million yuan ($75.4 million) in November, a decrease of 31.3 percent month-on-month.

However, China's top think tank, the Chinese Academy of Social Sciences, announced last week that it forecast the world's second largest economy will quicken its growth to 8.2 percent next year, from an expected 7.7 percent this year, partly due to the authorities' growth-boosting policies.

"Of course, if the economy gets better, it would promote stock trading, which will lead to a good period for securities companies. But that process takes at least half a year, I think," said Li.