CITIC Securities, a leading brokerage stock, saw a rare sharp drop today.
The fuse of this sharp drop comes from its newly announced allotment plan. According to its plan, the raised funds will reach up to 28 billion yuan.
As soon as this news came out, all parties were in an uproar. Many investors questioned one after another, and some investors directly ridiculed their “cashing of money.”
However, market participants believe that the allotment of funds is also a necessary measure to solve the capital adequacy ratio of securities firms. Lai Haizun, director and general manager of Guangzhou Jiazhang Investment Consulting Management Co., Ltd., believes that investors have a certain understanding of the refinancing of securities companies, but the securities companies can greatly increase the capital adequacy ratio after allotment to go higher and further. After this adjustment, it is a good buying opportunity for investors, and the future market returns can exceed expectations.
Drag the entire brokerage sector down
At the opening today, CITIC Securities plummeted, with a drop of nearly 8% at one time.
For this plunge, many investors have been psychologically prepared. In the evening of last Friday, CITIC Securities issued a plan for the public offering of securities by allotment, and planned to allot 1.939 billion shares to the original shareholders and raise funds not exceeding 28 billion yuan. Among them, the number of A-share allotment shares does not exceed 1.597 billion shares, and the number of H-share allotment shares does not exceed 342 million shares.
Regarding the allotment, CITIC Securities stated that the net proceeds after deducting the issuance expenses of the proceeds will be used to develop capital intermediary business, increase investment in subsidiaries, strengthen the construction of information systems, and supplement other working capital. CITIC Securities stated that the necessity of this issuance is to respond to the national strategy, build an “aircraft carrier-level” brokerage, deal with increasingly fierce industry competition, actively participate in international market competition, promote the realization of the company’s strategic goals, and help the company “become the most trusted by global customers Leading domestic and world-class Chinese investment bank”, reducing liquidity risks and enhancing the company’s risk resilience capabilities.
In today’s afternoon, CITIC Securities narrowed its decline. To the close, CITIC Securities closed at 25.62 per share, down 5.98%.
The sharp drop of CITIC Securities today also directly dragged down the performance of the entire brokerage sector. Today, the securities sector is generally green. Among them, Industrial Securities fell nearly 7% at the opening and 5.51% at the close; Founder Securities fell 1.16%, Guangfa Securities fell 0.69%, and China Merchants Securities fell 0.78%.
Investors satirize its “blood sucking”
Many market investors also expressed their dissatisfaction with the stock allotment plan, ridiculing CITIC Securities’ “money collection” and “blood sucking” on the Internet.
Time Finance found that CITIC Securities has conducted three additional issuances in 2006, 2007, and 2020, with funds raised of 4.645 billion yuan, 25 billion yuan, and 13.46 billion yuan, respectively. The total amount of funds raised has reached 43.1 billion yuan. . The 28 billion plan thrown this time is the highest in history.
Although the allotment of stocks by securities firms has been a routine action of many listed securities firms in recent years, it is still relatively rare for them to be as dense as CITIC Securities and with such a large amount. Compared with last year, six securities companies, including Tianfeng Securities, Guoyuan Securities, and China Merchants Securities, completed allotments, raising a total of 37.27 billion yuan in funds. The amount of allotments made by CITIC Securities this time accounted for more than 70% of the amount of allotments last year.
In contrast, just last week, the operating data released by the Securities Industry Association of China showed that the securities industry achieved operating income of 448.479 billion yuan in 2020, a year-on-year increase of 24.41%, and the entire industry realized a net profit of 157.534 billion yuan, a year-on-year increase of 27.98%. 127 securities companies achieved profitability. Among them, the securities industry achieved 67.211 billion yuan in net income from investment banking in 2020, a significant increase of 39.26% year-on-year. In terms of IPO underwriting revenue, CITIC Securities is second only to CITIC Construction Investment, earning nearly 2.3 billion yuan in revenue.
On January 22, CITIC Securities released its 2020 performance report. According to preliminary calculations, the company’s 2020 operating income was 54.348 billion yuan, a year-on-year increase of 25.98%, and net profit attributable to the parent was 14.897 billion yuan, a year-on-year increase of 21.82%. The performance was slightly lower than the expected year-on-year growth of 26%.
Enriching the capital adequacy ratio can go further
Regarding the sharp decline of CITIC Securities today, Lai Haizun, director and general manager of Guangzhou Jiazhang Investment Consulting Management Co., Ltd., analyzed to Times Finance that capital adequacy ratio has always been a very serious problem since the securities firms started to operate the two financing business. Together, they are not as large as the two securities firms on Wall Street. However, it is difficult for the return of capital to be reflected in shareholders, which has caused investors to have a certain sentiment about the refinancing of securities firms. In this regard, Lai Haizun believes that this sentiment of investors is understandable, including CITIC Securities’ inadequate dividend distribution to ordinary shareholders, has not considered the positive reaction of the market, and the feedback to ordinary investors is not enough.
But Lai Haizun also reminded investors not to be too emotional. This is because, judging from the recently announced financial report, CITIC Securities’ net profit margin and other aspects are still in the forefront of the industry, and the return on capital and core competitiveness are still relatively high, which shows that the profitability in the capital market is relatively strong.
Data for 2020 shows that domestic brokerages have relatively good profits, but for this year, many investors have raised concerns. In this regard, Lai Haizun believes that the structural market will continue to go this year, and we should not look too lightly or too negatively. The recent adjustments are inevitable and will still fluctuate, mainly because the previous market valuation is relatively high, and with the pre-disclosure of the annual report, the performance of some companies is not satisfactory, and the fluctuations in the upstream and downstream correlations will also Followed by. After CITIC Securities released the refinancing plan, whether there will be other securities companies to follow up in the future has also caused investors to question.
But Lai Haizun said frankly that for listed securities firms, it is necessary to enrich the capital adequacy ratio in order to go higher and further. After this adjustment, it is a good buying opportunity for investors. With the development of the financial industry, the expected market returns of this wave of securities companies’ allotment may exceed expectations.
Reprint indicated source：Shine Trader Limited Live information