China's 43 major securities firms theoretically can provide 778 billion yuan (US$97 billion) of funds for the country's stock market, the Securities Times reported on Tuesday.

 

According to their annual reports, the net capital of those 43 securities firms by the end of 2005 totaled 42 billion yuan.

 

Through means of financing in agency business, their own stock deals and pool asset management, the 43 securities firms are capable of creating a scale of investment of 778 billion yuan, the newspaper calculated.

 

Besides the securities investment fund, QFII (Qualified Foreign Institutional Investor) and the insurance fund, securities firms' considerable influence upon the Chinese stock market should not be ignored, it said.

 

Although securities firms were once prohibited from providing financing services for their clients' stock trade, a regulation promulgated on Jan. 6 this year by the China Securities Regulatory Commission (CSRC), the country's stock market watchdog, annuled the ban and allowed securities agencies to offer a financing scale no more than 10 times their net assets for their clients.

 

This means if such a finance service is started, the 43 agencies with net assets worth 42 billion yuan can inject a maximum amount of 420 billion yuan into the stock market, said the newspaper.

 

Moreover, according to the same regulation from CSRC, securities firms can also trade stock by themselves with maximum value equal to their net assets, and conduct other kinds of investment services of their own with a maximum scale twice the net assets.

 

On the basis of the newspaper's calculation, such independent services can help securities firms provide another 59.1 billion yuan for the stock market.

 

The 15 experimental securities firms have the right to conduct pool asset management services, with a maximum trading scale 10 times their net assets, which roughly total 27.4 billion yuan, said the newspaper, estimating such a service could provide an additional 274 billion yuan for the stock market.

 

Due to the long lasting bearish period of China's stock market caused by flawed institutional problems and poor corporate governance, the country's 100-plus securities firms witnessed billions of yuan of deficits in the past several years.

 

The downturn in the stock market has triggered the closing of some securities firms, including the Guangdong International Trust & Investment Corporation and Nanfang Bonds Company.

 

Since the beginning of 2006, however, China's stock market seemed to reach a turning point and it remained bullish for a month. Analysts expressed optimism about the prospects of Chinese stock market in 2006, since ongoing share reform, an increasing investment influx and underestimated share prices are making the Chinese A-share markets more valuable and more attractive.

 

(Xinhua News Agency February 8, 2006)