China's leading securities brokerages downsize

BEIJING -- With the "economic barometer" of the world's second-largest economy giving its weakest reading since 2009, China's major securities brokerage firms are saying goodbye to talents they treasured when the stock market was booming.

Personnel with the investment banking departments of the country's second-largest broker, CITIC Securities, caught a chill in Beijing this winter when 5 to 10 percent of the 710 employees in these departments were affected by a new wave of job cuts that kicked off in November, local media reported.

"The downsizing this time will cover a wider range of departments and involve more staff than last year's adjustment in personnel structure," a senior manager who declined to be named was quoted as saying in the edition of Caijing Magazine published earlier this week.

CITIC pledged to offer each laid-off employee five-months' salary and a "loyalty bonus" as compensation.

According to the company's third quarter financial report, CITIC's revenue tumbled 14 percent year-on-year to 8.15 billion yuan ($1.3 billion) in the first three quarters of 2012.

At about the same time, the stock market experienced major turbulence, with the benchmark Shanghai Composite Index dipping to 1,963.49 on Nov 29, its lowest point since early 2009.

The year's continuous declines have dented investor confidence, as capital raised on China's yuan-denominated stock market through initial public offerings and refinancing - the main businesses of brokerage firms - dropped substantially in the first ten months of the year.

Slammed by the bearish market, other domestic brokerages adopted similar approaches to weather the storm. GF Securities and China International Capital Co, or CICC, started their job cuts as early as September 2011.

In addition to downsizing, GF Securities lowered workers' monthly salaries by an overall margin of 15 percent last year, and CICC ended contracts with overseas experts they had once paid nearly $1 million annually.

However, the largest staff cuts were made by China Galaxy Securities, which nearly halved its marketing and sales personnel.

"The huge profitability in securities underwriting has ended," a seasoned financial sponsor told Caijing. "Sentiment among brokerage firms remains weak, as they expect to see less business in the future. It's the root cause of this round of layoffs."

So far this year, only half of all 77 brokerage firms in China participated in the IPO processes for 152 companies, leaving the remaining brokerage firms with no income in the formerly lucrative business.

Wind Information, a Shanghai-based financial data provider, said combined revenues from stock trading commissions also came as a disappointment to struggling companies, dropping 40 percent year-on-year to 38.6 billion yuan in the January-September period. Still, some aren't ready to say the cuts are happening across the board. Ma Yong, an analyst with China Galaxy Securities, said, "There should be further study on whether the phenomenon is that prevalent among brokerages."

While it is necessary for large brokerage firms to carry out restructuring and downsizing, small companies and start-ups are desperate for new talent, he added.

A flow of talent from large companies to small ones is becoming noticeable. Staff that received training from mature brokers are popular among emerging employers, who are willing to offer trained recruits a basic salary 40 to 50 percent higher than their previous employer, according to the Caijing report.

"The flow is inevitable and will be a trend," the report quoted a senior manager with Guotai Jun'an Securities Co as saying.