By staff reporter Song Yanhua

(Caijing.com.cn) Securities firms can benefit greatly from the new Growth Enterprise Market as it will boost their brokerage, investment banking and direct investment businesses, analysts said.

Zhang Li, an analyst with United Securities Co., told Caijing that direct investments in GEM companies will become a particularly important source of revenue for securities firms.

In 2007, China launched a pilot program to allow securities companies to invest directly in IPOs alongside their brokerage, underwriting and sponsoring activities. An upper limit was set for the investments at 15 percent of the investor's net capital.

The direct investment subsidiary of Citic Securities recently purchased a 2.2 percent stake in UltraPower Software Co. (SZSE: 300002) for 27.7 million yuan and a 6.96 percent stake in Siasun Robot & Automation Co. for 25.6 million yuan, both at discounted prices.

Similarly, Haitong Securities spent 3.75 million yuan on a 2.5 percent stake in Silver River Electronics.

According to United Securities' figures, Citic Securities used only half of its investment quota, while Haitong Securities used just 30 percent.

According to an unidentified analyst, securities firms could see returns on their investments in GEM firms within two or three years.

However, a lawyer told Caijing that securities firms will not have many opportunities to invest in GEM companies as the latter have various means of raising capital, such as through private equity firms and venture capitalists.

1 yuan = 14 U.S. cents

Full article in Chinese: http://www.caijing.com.cn/2009-09-29/110268148.html