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Lay-off Wave in China's Securities Companies Looms amid Market Downturn

12-03 10:58 Caijing
China’s seeing a new wave of layoffs in securities companies as revenues from underwriting along with the number of companies planning IPOs both hit record lows

China’s seeing a new wave of layoffs in securities companies as revenues from underwriting along with the number of companies planning IPOs both hit record lows.
 
Securities companies recorded revenues of 5.43billion yuan so far this year, a whopping 58.2% drop compared with the corresponding period last year.

CITIC Securities Company Ltd., one of China’s leading securities traders, announced a plan to lay off its employees by 5%-10% starting November.

The company said it will provide the laid-off employees 5-month salaries as well as a certain amount of cash as compensation.

The move came as surprising as Citic reported a strong Q3 growth in the company’s investment banking business which generated a net revenue from underwriting of 1.38billion yuan, up 23% from the same period in the previous year, compared with a 14% fall in the company’s total revenue.

By the end of August, Citic’s investment banking unit has about 710 employees, the largest compared with other players in the industry. 

Investment banking has always be a major source of revenue for Chinese securities companies.

However, lay-off was seen as an important way to cut management expenses as China’s securities companies are having a hard time in the sluggish securities market as well as a slowing economy.

The fund China raised through IPOs hit a record low of 103.39billion yuan by the end of October, even lower than the 103.65billion yuan for the whole year of 2008 in the depth of the financial crisis.

The amount of re-financing in the country’s A-share market also hit a new low since 2009 of 182.12billion yuan.

Securities companies including China International Capital Co. Ltd. (CICC) and China Galaxy Securities Co.Ltd(Galaxy) both started a workforce reduction since last September.

Galaxy slashed its marketing and brokerage departments by as much as 50%, while Guangfa Securities Co. Ltd announced a plan to cut staff pay by 15%.

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