100 billion in one month! Brokerage bonds are ferocious

Spring is coming......

Author | Small debt

Source | Bond Market Watch

Since the beginning of 2024, the momentum of bond issuance by brokerages has remained rapid.

According to wind data, as of January 31, the cumulative scale of successful bond issuance by brokerages has exceeded 100 billion yuan (113.49 billion). This compares with 70.2 billion yuan in the same period last year, a year-on-year increase of 61%.

At the beginning of the new year, the total amount of corporate bonds approved by Guolian Securities and Guojin Securities reached 33 billion yuan. By the last day of the month, Haitong Securities was also approved for subordinated corporate bonds of no more than 20 billion.

Previously, the first bond issuance by a brokerage firm in the new year was approved. On January 3, Guolian Securities announced that the total amount of corporate bonds approved did not exceed 18 billion yuan. By January 22, the first phase of corporate bonds of 1.5 billion yuan was successfully issued.

Guojin Securities also said on January 18 that it was approved to issue corporate bonds with a total amount of no more than 15 billion yuan, with a validity period of 24 months. On the 29th of the month, Sinolink Securities successfully issued the first issue.

Judging from the scale of bonds issued, as of January 31, the five securities firms with the largest amount of successful issuance were Guosen Securities, GF Securities, CITIC Securities, China Securities Construction Investment, and China Galaxy, all of which amounted to more than 6 billion yuan. Among them, Guosen Securities has the highest scale of bonds issued, with a total amount of 11.1 billion yuan. In second place is GF Securities, with a total amount of 11 billion yuan.

Source: Wind

From the perspective of fundraising, since January, the bonds issued by securities companies have been mainly used to repay the company's interest-bearing debts due and supplement the company's working capital, and the other is to replace part of the self-owned funds of the previous bond redemption.

From the perspective of the types of bonds issued by various brokerages, corporate bonds are one of the most important financing channels for brokerages, and their total issuance accounts for the highest proportion.

It is understood that securities corporate bonds are securities issued by securities firms, and there are generally three types of issuance needs: one is business demand, that is, to supplement the working capital required for operation and improve the net stable funding rate; second, the demand for capital replenishment to enrich the net capital of securities companies; and the third is the demand for debt repayment, that is, to repay the principal and interest of the specified company's debts.

01

Bond issuance year 2023

In fact, from 2023 onwards, the issuance of bonds by brokerages will pick up. Due to the unfavorable factors faced by equity financing, securities companies mainly raise funds through bond issuance.

According to Wind data, in 2023, the scale of domestic bond issuance by brokerages will exceed 1.5 trillion yuan, a year-on-year increase of 35.13%. Among them, corporate bonds are still the main force of securities companies, with a bond issuance scale of 881.73 billion yuan, a year-on-year increase of 65.72%, subordinated bonds of 164.933 billion yuan, a year-on-year decrease of 7.81%, and short-term financing bonds of 452.97 billion yuan, a year-on-year increase of 13.57%.

In addition, there are 36 securities companies with an issuance scale of more than 10 billion yuan, of which 9 securities companies have issued bonds with a scale of more than 50 billion yuan. CITIC Securities, China Merchants Securities, and Guosen Securities ranked among the top three in 2023 with bond issuance scale of 124 billion yuan, 99.1 billion yuan, and 97.7 billion yuan respectively.

Source: Canned Gallery

From the perspective of the increase in the issuance scale, in 2023, 22 securities companies will increase the scale of bond issuance by more than 60%, of which 14 will double the growth, CITIC Securities, AVIC Securities, Cinda Securities, Hongta Securities, Industrial Securities, and Bank of China Securities will be the top increase.

At present, it seems that the momentum of bond issuance in 2023 has continued into 2024.

Industry insiders believe that the increase in the demand for "blood replenishment" of brokerage bonds is related to the obstruction of equity financing of brokerages. Since 2023, securities companies have faced great difficulties in IPO listing, private placement, and share allotment, but there has been no obstacle in bond financing.

In fact, last year, two leading brokerages successively suspended the 10 billion allotment plan, and a number of brokerages revised the additional issuance plan, and some brokerage institutions also terminated the private placement project after the revision. In addition, the progress of the review of the six securities companies to be listed is also relatively slow, and the constraints on equity financing of securities companies have gradually emerged.

Taking Zhongyuan Securities, a small and medium-sized brokerage, as an example, on July 21, 2023, Zhongyuan Securities issued an announcement on the termination of the private placement fundraising plan and announced that it would withdraw the application documents. Zhongyuan Securities' private placement plan began with the private placement proposal passed on April 29, 2022, and plans to raise 7 billion yuan. On August 4, 2022, after the private placement plan was accepted by the China Securities Regulatory Commission, by July 6, 2023, the company has received three rounds of inquiries from regulators. In the end, the company withdrew the application documents in late July and terminated the private placement fundraising plan.

Source: Canned Gallery

Tian Lihui, vice president of Guangxi University and dean of the Institute of Financial Development of Nankai University, told the Economic Information Daily, "the downturn in the secondary market has affected the profitability and business development of brokerages, and at the same time, the equity financing environment has tightened, so brokerages need to carry out debt financing to obtain a relatively stable source of funds, support the rapid development of business, and optimize the debt structure to deal with liquidity risks." ”

"The bond financing issuance process is simple and time-consuming" Wang Weiyi, chief analyst of the non-bank financial industry of Ping An Securities, told China Fortune Network that in addition to long-term subordinated bonds, which can be partially included in the subsidiary net capital, ordinary corporate bonds and short-term securities are included in the debt balance of brokerages. Therefore, it is more suitable for brokerages with more abundant net capital but more tight liquidity to supplement short- and medium-term liquidity.

02

Underwriting also continued to make efforts

In addition, the brokerage bond underwriting business is also strong.

Since the beginning of the year, as of February 2, 81 securities firms have underwritten a total of 844.76 billion yuan of bonds.

Specifically, CITIC Securities, the "first brother of brokerage", topped the list with an underwriting amount of 103.691 billion yuan, while Guotai Junan and China Securities Construction Investment ranked second and third in the total underwriting list with 80.146 billion yuan and 75.293 billion yuan respectively. In addition, Huatai Securities, CICC, Ping An Securities, Orient Securities and other four securities companies underwrote more than 30 billion yuan, respectively 72.677 billion yuan, 57.039 billion yuan, 39.882 billion yuan and 36.491 billion yuan, ranking fourth to seventh.

The underwriting amount of the above 7 leading brokerages has accounted for 55% of the total underwriting, accounting for half of the underwriting list.

Source: Wind

In terms of securities underwriting business, according to the special statistics on the 2023 bond underwriting business of securities companies released by the Securities Association of China (hereinafter referred to as the "China Securities Association") in November 2023, in the first three quarters of 2023, a total of 48 securities companies served as the lead underwriters of corporate bonds of private enterprises or managers of asset securitization products, underwriting (or managing) 213 bonds (or products), with a total amount of 223.468 billion yuan. Among them, there are 160 asset securitization products, with a total amount of 137.918 billion.

In recent years, the risk of private enterprise bonds has occurred frequently, which has made institutional investors "stay away". The proportion of private enterprise bonds in the credit market has also shown a gradual downward trend, and the difficulty in issuing bonds has once become a common problem faced by private enterprises.

According to the "21st Century Business Herald", the risk of default of private enterprise bonds is high, especially in the past few years, the financial fraud of individual private enterprises has exacerbated the concerns of investors, and institutions do not buy private enterprise bonds, and the scale of issuance has declined.

In May 2018, Oriental Garden originally planned to issue 1 billion yuan of corporate bonds, but only 50 million yuan was actually issued, which was ridiculed by the outside world as "the coolest bond in history".

Source: Canned Gallery

In fact, since 2018, support policies for private enterprise bonds have been continuously introduced. In November of that year, the People's Bank of China (PBOC) proposed the "three arrows" policy of financing through three types of channels: loans, bonds and equity, and piloted and expanded the financing support tools for private enterprise bonds.

Since then, the China Securities Regulatory Commission has successively issued a series of policies to support the financing of private enterprises. In May 2022, the exchange bond market launched a special support plan for bond financing for private enterprises, which is implemented by China Securities Finance Corporation with its own funds, and through cooperation with bond underwriters to create credit protection tools, credit enhancement support for private enterprise bond financing with market, prospects, technical competitiveness and in line with the national industrial policy and strategic direction.

In addition, the bond issuance of private enterprises was also included in the special statistics of the bond underwriting business of securities companies of the China Securities Association for the first time in 2022. This measure has also boosted the enthusiasm of brokerages to underwrite private enterprise bonds.

According to the Economic Observer, from 2023 to the end of August, the scale of private enterprise bond issuance was 445.260 billion yuan, a year-on-year decrease of 6.35%, and the year-on-year decline was the lowest level since 2020.

It is worth noting that real estate enterprises account for the majority of private enterprise bonds, and since 2021, the risks of real estate enterprises have continued to ferment, and the financing of private real estate enterprises is relatively difficult, and the scale of debt repayment is much higher than the scale of bond issuance.

Since the end of October last year, the financial regulatory authorities have held intensive important meetings, all of which proposed to meet the reasonable financing needs of real estate enterprises under different ownership systems without discrimination.

It is worth noting that with the support of real estate financial policies, a number of real estate companies have recently successfully issued bonds or announced bond issuance plans. Since 2023, a number of real estate companies such as Midea Real Estate, Yuexiu Real Estate, and C&D Real Estate have successfully issued bonds, and China Debt Increase and other financial institutions have provided various forms of guarantees for bonds of more than 19 billion yuan issued by 12 private real estate enterprises.

It is believed that with the continuous development of financing support policies and the detailed implementation of policies, the financing demand for bond issuance by real estate enterprises will be further eased in the future.

What do you think of the performance of a number of brokerage firms going hand in hand and intensively issuing bonds? Is it expected that the underwriting of securities firms will continue to increase the weight of private enterprise bonds? Welcome to leave a message in the comment area to discuss.