Securities firms are likely to post better performance in the second half of the year even as they attempt to generate income from diversified channels and are turning more cautious in their capital market operations, according to a market analyst.

"Most of the securities firms have reported solid profit growth in the first half, but it is more important for them to lock in these profits in the second half also," Song Jian, analyst, China Minzu Securities, told China Daily.

Taking advantage of the bullish market in the first half of this year, the 65 securities companies reported a total net profit of 38.6 billion yuan during the period, 30 percent higher than earlier, according to Wind Info.

Listed industry giants like CITIC Securities have failed to surpass the average industry level performance. The reported profits for the 10 listed securities firms are 10.4 billion yuan, up 7.1 percent year-on-year, according a recent report by the by the Shanghai Securities News.

The net profit of CITIC was 3.83 billion yuan, down 19.77 percent year-on-year according to its statement made to Shanghai Stock Exchange.

CITIC said investment returns declined 45 percent year-on-year. Earnings from underwriting operations decreased by 36.86 percent as new IPOs were suspended for most part of the first half.

Compared with the underperforming listed securities firms, most of the unlisted securities companies have reported huge profits due to their aggressive investment stance.

The total value of the shares held by Guotai Junan Securities, which increased its investment in share market since the second quarter, surged to 8.66 billion yuan by the end of June, while the market value of its instruments increased by 45 percent year-on-year, according to the Guangzhou-based Information Times.

"The amount of their investment in the stock market is the most important factor in deciding the performance of the securities companies in the first half of this year," said Song.

However, the fluctuating stock market has also made analysts conservative on the full year performance of the listed securities firms.

"It is really hard to predict the performance of the stock market at present," said Song.

The stock market saw sharp fluctuations in August, and recorded the biggest daily drop in 14 months on Monday

As one of the profit generating units, the IPO sector may also contribute a lot to boost the performance of the firms, said an analyst surnamed Zhao, from the Finance and Industry Institute of Northeast Securities.

(China Daily September 2, 2009)