(Yicai) Oct. 9 -- Chinese mainland-listed brokerages are accelerating the pace of their offshore expansion as international operations become an increasingly important source of earnings growth.

Since the start of last year, 17 brokers have set out plans to expand overseas operations, Yicai calculated. Citic Securities and Guotai Haitong Securities are among those strengthening existing overseas subsidiaries through capital injections, while smaller and mid-sized firms, including Northeast Securities and Western Securities, have announced plans to set up new Hong Kong units and build their international businesses from scratch.

Guolian Securities also recently announced that its Hong Kong subsidiary received approval from the China Securities Regulatory Commission for a capital injection of CNY2 billion (USD299 million).

Industry insiders attribute the ongoing injection of capital into the overseas operations of Chinese-listed brokerages to the rise in earnings at these units. As a result, overseas business is emerging as a new growth engine for Chinese-listed brokerages.

A research report by Guosen Securities showed that 15 listed brokers with comparable data generated CNY34.16 billion (USD5.1 billion) in overseas revenue in the first half of this year. International operations accounted for 19 percent of their combined income, with overseas revenue jumping 70 percent from a year earlier, outpacing their overall income growth.

Overseas business has become particularly important to leading brokerages. Citic Securities’ foreign revenue soared almost 71 percent to CNY11.8 billion in the six months ended June 30 from a year earlier, Chairman Zou Yingguang said on its earnings conference call last month. In the same period, the firm’s operating revenue and net profit rose 50 percent and 70 percent, respectively.

China’s brokers are also bolstering their competitiveness abroad. Their offshore units occupied six of the top 10 spots in Hong Kong’s equity underwriting rankings as of yesterday, according to Wind data. CICC Hong Kong ranked first after raising CNY87.9 billion of funds for a market share of 22.5 percent, highlighting the competitive position of Chinese securities firms in Hong Kong’s equity financing market.

Demand from mainland companies seeking to expand overseas is expected to continue increasing, alongside growing demand among mainland investors for cross-border asset allocation, analysts at Guotai Haitong’s non-bank financial team said.

As investments made by leading brokers in their international businesses in recent years begin to yield results, overseas operations are expected to contribute a growing share of their profits and become an important driver of earnings growth, the team said. It estimates that the addressable market for securities firms’ businesses in Hong Kong could exceed HKD350 billion (USD44.6 billion) by 2028.

Editor: Tom Litting