China’s Largest Broker Plunges on Rumors Over Losses
Shares of Shanghai-listed Citic Securities, China’s largest brokerage firm, fell by 9.1 percent on Monday after rumors the company had suffered a large 2.9 billion yuan ($460 million) loss on overseas trading.
But a spokesperson for the company denied the rumors and told CNBC that reports the company’s chairman had been arrested by the police were also untrue.
The drop in Citic’s shares also affected other brokers on Monday with shares of Haitong Securities falling 8.6 percent. Reuters reported that traders were worried over earnings in the latest quarter.
Citic securities reports results on August 30th and the firm is currently in a quiet period, during which it cannot discuss its financials.
Dickie Wong, Executive Director of research at Kingston Securities said he had not been able to confirm any of the rumors and that investors would have to wait for a filing with the Hong Kong Exchange for more details.
Wong told CNBC that the shares of China’s brokerages were no longer that attractive based on price-to-earnings ratios when compared to the major bank stocks. He said mainland-listed bank stocks were trading at valuations of between 5 and 6 times forward earnings. On the other hand, shares of Citic Securities are trading at 21 times forward earnings.
Chinese authorities have been trying to boost confidence in the country’s stock market by allowing increased foreign participation. But pessimism over stocks has persisted, hurting brokers. The Shanghai Composite has fallen 13 percent from the year’s peak and trades at just over 9 times earnings.
- By CNBC's Deepanshu Bagchee