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With the third-quarter earnings season now complete, the full picture of securities firms' proprietary trading operations has become clear. During the second half of the year, A-share market volatility and weakness dragged down proprietary trading at most brokerages, yet some firms managed to capture significant gains through co-investment strategies.
According to Wind data, in the first three quarters, 42 listed securities firms collectively generated 202.502 billion yuan in proprietary trading revenue, up nearly 9% year-on-year. Seven brokerages posted proprietary trading revenue exceeding 10 billion yuan during the period, all of them industry leaders, including Citic Securities Company Limited (600030.SH), Guotai Haitong Securities Co., Ltd. (601211.SH) and China International Capital Corporation Limited (601995.SH).
On a quarterly basis, however, many brokerages recorded proprietary trading losses in the third quarter. Guosen Securities Co.,Ltd. (002736.SZ) posted a third-quarter proprietary trading loss of 1.247 billion yuan, while Changjiang Securities Company Limited (000783.SZ) and Soochow Securities Company Limited. (601555.SH) also suffered losses on the proprietary trading side. Proprietary trading has also weighed on overall brokerage performance, with some companies reporting declines in both revenue and profit in their third-quarter reports.
In contrast, thanks to the listing of several large technology enterprises in the third quarter, some brokerages benefited from IPO-related gains. Huaan Securities generated 3.91 billion yuan in proprietary trading revenue in the first three quarters, a figure that surpassed industry leaders such as Citic Securities Company Limited and GF Securities. Earlier, Huaan Securities indirectly invested in Yangtze Memory Technologies and ChangXin Memory Technologies through its subsidiaries.
With the interim reports finalized, the latest proprietary trading holdings of securities firms have also been disclosed. According to Tonghuashun statistics, as of the end of September, securities firms appeared among the top ten circulating shareholders of more than 200 A-share companies, with a combined holding market value of nearly 56 billion yuan. The industry distribution of brokerage holdings is relatively diversified, covering finance, food and beverage, energy, technology and other sectors, while large financial stocks remain brokerages' favorites.
Guosen Securities Posts Over 1.2 Billion Yuan Single-Quarter Proprietary Trading Loss
In the first half of the year, the A-share market experienced volatility and pullbacks, with major indices showing upward trends. As of the end of June, the Shanghai Composite Index had risen 3.16% for the first half, while the Shenzhen Component Index and ChiNext Index gained 19.82% and 35.58% respectively during the same period. But after July, market volatility intensified, with the Shanghai Composite Index falling from around 4,100 points to approximately 3,800 points. According to statistics, in the third quarter of this year, the Shanghai Composite Index fell 6.16%, while the Shenzhen Component Index and ChiNext Index declined 20.47% and 27.8% respectively.
The securities industry has long been characterized as "dependent on market conditions." When market trading is active, brokerages generate revenue from brokerage and proprietary trading businesses. Conversely, when the market experiences volatility and adjustment, brokerage performance suffers accordingly.
Calculated as "proprietary trading revenue = net investment income + net fair value change income - investment income from associates and joint ventures," the 42 A-share brokerages with comparable data generated a combined 202.502 billion yuan in proprietary trading revenue in the first three quarters of this year, up nearly 9% year-on-year. In terms of rankings, seven leading brokerages posted proprietary trading revenue exceeding 10 billion yuan in the first three quarters, in order: Citic Securities Company Limited (30.523 billion yuan), Guotai Haitong Securities Co., Ltd. (24.771 billion yuan), China Merchants Securities (20.959 billion yuan), China International Capital Corporation Limited (15.719 billion yuan), GF Securities (15.614 billion yuan), Huatai Securities (13.825 billion yuan) and China Securities Co., Ltd. (10.039 billion yuan).
Following closely behind, some brokerages recorded proprietary trading revenue in the 5 billion to 10 billion yuan range during the period, including China Galaxy Securities, Shenwan Hongyuan and Orient Securities. Guosheng Securities posted a proprietary trading loss, with revenue of -46 million yuan in the first three quarters. According to disclosures, Guosheng Securities' investment income reached 65 million yuan in the first three quarters, down 68.31% year-on-year, which the company attributed to a decrease in investment income from financial instruments.
On a single-quarter basis, many listed brokerages recorded proprietary trading losses in the third quarter. The largest loss was at Guosen Securities Co.,Ltd., which posted a single-quarter proprietary trading loss of 1.247 billion yuan. The company's third-quarter report also showed declines in both revenue and net profit, with revenue of 15.205 billion yuan and net profit attributable to parent company shareholders of 6.498 billion yuan, down 20.82% and 28.88% respectively year-on-year. Looking at just the third quarter, Guosen Securities' performance decline was even more pronounced, with single-quarter revenue of 2.646 billion yuan and net profit attributable to parent company shareholders of 767 million yuan, down 67.45% and 79.66% respectively year-on-year. According to disclosures, in the first three quarters, Guosen Securities' investment income was 5.181 billion yuan, down 36.82% year-on-year; fair value change income (loss) was -1.558 billion yuan, a sharp decline of 175.42% year-on-year.
Sci-Tech Innovation Board Co-Investments Boost Returns
However, thanks to the listing of several large technology enterprises in the third quarter, some brokerages captured IPO-related gains and delivered outstanding single-quarter performance. Calculated using the same methodology, in the third quarter of this year, the largest proprietary trading revenue was generated by China Merchants Securities, reaching 8.044 billion yuan. The company also achieved both revenue and profit growth in the first three quarters, with operating revenue of 34.112 billion yuan, up approximately 87% year-on-year, and net profit attributable to parent company shareholders of 17.282 billion yuan, up approximately 95% year-on-year.
Regarding the performance growth, China Merchants Securities Chairman Zhu Jiangtao said at a recent earnings conference that the company achieved revenue growth, with investment business income (investment income + fair value change income) contributing significantly to the overall increase in operating revenue.
The second and third largest single-quarter proprietary trading revenues were posted by China International Capital Corporation Limited and Huaan Securities, reaching 5.565 billion yuan and 3.91 billion yuan respectively. Both brokerages also delivered relatively strong overall performance in the first three quarters. Among them, China International Capital Corporation Limited recorded revenue of 30.715 billion yuan and net profit attributable to parent company shareholders of 13.245 billion yuan in the first three quarters, up 47.95% and 101.71% respectively year-on-year; during the same period, Huaan Securities posted revenue of 8.763 billion yuan and net profit attributable to parent company shareholders of 5.077 billion yuan, up 112.22% and 169.56% respectively year-on-year.
Regarding its performance growth, China International Capital Corporation Limited attributed it mainly to increases in net fee and commission income as well as net gains from financial instrument investments. According to disclosures, in the first three quarters, the company's net fee and commission income, investment income and fair value change gains all increased by more than 40% year-on-year, reaching 14.752 billion yuan and 15.792 billion yuan.
Huaan Securities stated that revenue growth was mainly due to significant year-on-year increases in private equity fund business and alternative investment business income. The reporter noted that at an earlier interim report earnings briefing, investors inquired about Huaan Securities' investments in ChangXin Memory Technologies and Yangtze Memory Technologies. Huaan Securities Chairman Zhang Hongtao responded that regarding Yangtze Memory Technologies, the company holds a 20% stake in Anhui Wantou Anhua Modern Industry Investment Partnership through its subsidiary Huaan Jiaye. Wantou Anhua is specifically used to invest in the National Integrated Circuit Industry Investment Fund Phase II Co., Ltd. and holds a 3.67% stake in it, while the integrated circuit fund holds an 11.38% stake in Yangtze Memory Technologies. According to public information, regarding its stake in ChangXin Memory Technologies, Huaan Securities directly holds 0.75% through the Anhua Innovation Phase V Fund under Huaan Jiaye, and indirectly holds 0.4391% through Wantou Anhua's participation in the National Big Fund Phase II, totaling approximately 264 million shares through both channels.
Major Brokerage Holdings Revealed
With the third-quarter reports finalized, the latest proprietary trading holdings of securities firms have also been disclosed. According to Tonghuashun data, as of the end of the third quarter, securities firms appeared among the top ten circulating shareholders of more than 200 A-share companies, with a combined holding market value of nearly 56 billion yuan. Overall, the industry distribution of brokerage holdings is relatively diversified, covering finance, food and beverage, energy, technology and other sectors.
The reporter found that large financial stocks remain the focus of brokerage proprietary trading portfolios, with banking stocks among the top holdings by scale. According to the above statistics, as of the end of September, Bank Of Jiangsu Co.,Ltd. (600919.SH), Yongan Futures Co.,Ltd. (600927.SH) and China Securities Co., Ltd. (601066.SH) were held by Huatai Securities, Caitong Securities and Citic Securities Company Limited respectively, with period-end holdings of 923 million shares, 439 million shares and 383 million shares respectively.
Several other brokerage stocks and bank stocks are also held by brokerage shareholders. For example, within the above statistical period, Citic Securities Company Limited held 59.3641 million shares of Northeast Securities Co.,Ltd. (000686.SZ), and Guosen Securities Co.,Ltd. held 68.4468 million shares of Bank Of Qingdao Co.,Ltd. (002948.SZ).
In addition to large financial stocks, stocks with relatively high brokerage holdings also appeared in sectors such as petroleum and petrochemicals, biomedicine and public utilities. Within the above period, three additional stocks were held by brokerage shareholders for more than 100 million shares: Shanghai Raas Blood Products Co.,Ltd. (002252.SZ), Bank Of Chengdu Co., Ltd. (601838.SH) and Inner Mongolia Meng Dian Hua Neng Thermal Power Corporation Limited (600863.SH), with holders including Citic Securities Company Limited, Soochow Securities Company Limited. and Orient Securities.
In terms of holding market value, during the same period, securities firms also held substantial positions in stocks such as Jilin Aodong Pharmaceutical Group Co.,Ltd. (000623.SZ), Anhui Conch Cement Company Limited (600585.SH) and Aoshikang Technology Co.,Ltd. (002913.SZ).
The reporter also noted that in the third quarter of this year, some brokerage shareholders reduced their positions in certain stocks. According to disclosures by Inner Mongolia Meng Dian Hua Neng Thermal Power Corporation Limited, among its top ten circulating shareholders in the third-quarter report, only one was a securities firm, namely Orient Securities, with a period-end holding of 100 million shares and a holding ratio of 1.43%, ranking as the company's seventh-largest circulating shareholder. During the interim report season, however, three of the top ten circulating shareholders of Inner Mongolia Meng Dian Hua Neng Thermal Power Corporation Limited were securities firms, including Orient Securities, Dongxing Securities and Guotai Haitong Securities Co., Ltd., with holdings of 101 million shares, 56 million shares and 41 million shares respectively as of the end of June, representing holding ratios of 1.54%, 0.87% and 0.63%, ranking as the fifth, seventh and ninth largest circulating shareholders respectively.
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