Era of industry mergers and acquisitions predicted as commission rates tumble, put pressure on profits

Chinese securities companies are seeking deeper cooperation opportunities with Internet operators to win broader customer relationships and accelerate financial innovation.

The online new business model is likely to arouse a wave of mergers and acquisitions in the securities industry in 2014, analysts said.

How to invest your year-end bonus?

Internet finance transforms China's financial landscape

Chen Fu, a researcher at Huatai Securities Co Ltd, said that after broadening the securities sales channels by using the Internet, which is in its infancy, securities companies will seek to enhance financial products and move into large fund management services.

"The Internet giants are finding it possible to obtain financial licenses and will create new types of online business in the coming months," Chen said.

According to analysts, after a large boom of "intermarriages" between Internet operators and banking services last year, this year will see Internet businesses and the securities sector targeting each other.

The borderless "net" is expected to break the geographic restrictions for securities services and largely reduce the operational costs for securities companies. They can reach more potential clients of brokerage, asset management and investment banking services through the Internet, the analysts said.

On Nov 23, Sinolink Securities Co Ltd signed a strategic cooperation agreement with Tencent Holdings Ltd, the third-largest Internet company in the world by market capitalization, which is based in Shenzhen, Guangdong province. The two parties agreed to jointly develop the opening of online securities accounts, trading and relevant customer services.

Tencent also agreed to help to promote an online platform for Sinolink Securities by using its core and extensive advertisement sources.

In October, Zhejiang Alibaba E-Commerce Co Ltd, the holder of the online payment unit of China's top e-commerce vendor Alibaba Group Holding Ltd, decided to buy a nominal 262.3 million yuan ($43.4 million) of the registered capital of Tianhong Asset Management Co Ltd for 1.18 billion yuan, becoming the fund management company's controlling shareholder with 51 percent of its equity.

China Securities Regulatory Commission, the nation's watchdog in the securities sector, reiterated its policy stance of encouraging Internet finance innovation, while paying close attention to the new financial products and controlling potential risks.

By the end of 2013, 115 securities companies had achieved a total amount of 159.24 billion yuan in annual business income, compared with 129.47 billion yuan from 114 companies in 2012, according to the data from the Securities Association of China.

The net profits of the securities companies increased to 44.02 billion yuan last year from 32.93 billion yuan in 2012.