Review and Outlook of the Asian Securities Industry from 2023 to Mid-2024
In 2023, affected by various factors such as geopolitical conflicts and trade protectionism, the global economy remained in a slow recovery stage. Global IPO activity slowed down, and the trend of stock market indices in major securities markets diverged. However, thanks to the continuous progress of regional economic integration in Asia and the continuous improvement of regional trade and investment liberalization and facilitation, the economic development of major Asian economies has shown great resilience, and the performance of major capital markets has also attracted much attention. In 2023, China led the world in the amount of funds raised by A-share IPOs for two consecutive years, and Japan’s major equity indices in the capital market ranked among the highest in the world. As the provider of capital market investment and financing services, the Asian securities industry seized the opportunity of Asian economic recovery, leveraged the unique advantages of the securities industry in connecting the investment side with the financing side, and actively tapped development opportunities in important areas such as technological innovation, digital transformation, sustainable development and aging population to strengthen regional financial research and cooperation, promoting the healthy development of the Asian capital market and securities industry. Looking ahead, with the deepening of regional economic integration and regional financial cooperation in Asia, the Asian securities industry will continue to strengthen its investment banking and wealth management capabilities, and actively serve the needs of the region’s industrial chain and supply chain optimization and upgrading and residents’ asset allocation, to promote regional trade and investment flows and contribute more to Asia’s economic and financial stability.
According to statistics, in 2023, China’s A-share IPO funds raised led the world for two consecutive years, with the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) raising IPO funds of USD26.983 billion and USD20.897 billion, ranking the world’s top two; the National Stock Exchange of India (NSE) raised IPO funds of USD8.007 billion, ranking third in Asia; the Hong Kong Exchanges and Clearing Limited (HKEX) raised IPO funds of USD5.915 billion, ranking fourth in Asia; Tokyo Stock Exchange (TSE) raised IPO funds of USD4.463 billion, ranking fifth in Asia. As at the end of 2023, the SSE Composite Index in Chinese Mainland closed at 2,974.93 points, down 3.7% from the end of the previous year, and the SZSE Composite Index closed at 9,524.69 points, down 13.5% from the end of the previous year; the Hang Seng Index closed at 17,047.39 points, down 13.8% from the end of the previous year; the Nikkei 225 Index closed at 33,464.17 points, up 28.2% from the end of the previous year; the Straits Times Index closed at 3,240.27 points, down 0.34% from the end of the previous year. In terms of total equity market capitalization[1], equity market capitalization of major Asian economies had risen and fallen by the end of 2023. Asia’s largest stock market was the SSE, with a total market capitalization of listed companies of USD6.52 trillion, down 0.1% from a year earlier; the second largest stock market was TSE, with a total market capitalization of USD6.15 trillion, up 23.0% from a year earlier; the SZSE ranked third, with a total market capitalization of USD4.37 trillion, down 4.4% from a year earlier; the NSE ranked fourth, with a total market capitalization of USD4.34 trillion, up 28.9% from a year earlier; HKEX ranked fifth, with a total market capitalization of USD3.97 trillion, down 13.0% from a year earlier; the total market capitalization of Singapore Exchange Limited (SGX) was USD608.3 billion, down 3.3% from a year earlier.
Securities industry is the provider of capital market investment and financing services, and plays a vital role in the stable operation of capital market. In 2023, the Asian securities industry seized the opportunity of Asian economic recovery, leveraged the unique advantages of the securities industry in connecting the investment side with the financing side, and actively tapped development opportunities in important areas such as technological innovation, digital transformation, sustainable development and aging population to strengthen regional financial research and cooperation, promoting the healthy development of the Asian securities industry.
I. Asset sizes
In 2023, the overall asset quality of the securities sector in major Asian economies continued to improve. The total assets, total liabilities and net assets of the securities industry in the Chinese Mainland and Japan increased, while those in Hong Kong, China decreased.
1. Analysis of assets of the Chinese Mainland’s securities industry
As at the end of 2023, there were 146[2] securities companies in China’s securities industry. Total assets of the industry were USD1.67 trillion, up 6.92% from the end of the previous year; total liabilities were USD1.25 trillion, up 7.28% from the end of the previous year; net assets were USD416.62 billion, up 5.85% from the end of the previous year.
2. Analysis of assets of the Japanese securities industry
As at the end of the reporting period[3], there were 267 securities companies in the Japanese securities industry. Total assets of the industry were USD1.76 trillion, up 20.36% from the end of the previous year; total liabilities were USD1.70 trillion, up 20.70% from the end of the previous year; net assets were USD58.78 billion, up 11.48% from the end of the previous year.
3. Analysis of assets of Hong Kong, China’s securities industry
As at the end of 2023, there were 1,406 securities dealers and securities margin financiers in Hong Kong, China. The total assets of the industry were USD170.507 billion, down 8.30% from the end of the previous year; total liabilities were USD108.879 billion, down 12.24% from the end of the previous year; net assets were USD61.628 billion, down 0.42% from the end of the previous year.
II. Earning capabilities
In 2023, the overall operating performance of the securities industry in major Asian economies remained solid. The securities industry in Japan and Hong Kong, China increased its operating income, net profit and return on equity, while the securities industry in China increased its operating income, and decreased its net profit and return on equity.
1. Analysis of the profitability of the Chinese Mainland’s securities industry
In 2023, the positive trend of China’s economic recovery was further consolidated, the overall operation of the securities industry was stable, and the operating performance showed resilience. In 2023, the industry reported operating income of USD57.3 billion, up 2.77% YoY; net profit of USD19.5 billion, down 3.14% YoY; industry average return on equity of 4.80%, down 0.51 percentage points YoY.
In terms of revenue sources, the main sources of industry profit were securities investment, securities brokerage, investment banking, credit intermediary and asset management. In 2023, securities investment business was the largest source of revenue in China’s securities industry, contributing 30.0% of operating income. Securities brokerage, investment banking, credit intermediary and asset management business accounted for 27.8%, 13.4%, 13.1% and 5.5% respectively.
In terms of revenue changes, the securities investment business contributed to the main business increase, while the revenue of other major business lines declined to varying degrees. In 2023, the industry reported a 100.1% increase in income from investment in securities.
2. Analysis of the profitability of the Japanese securities industry
In FY2023, the Japanese securities industry reported operating income of USD29 billion, up 17.1% YoY; net profit of USD4.7 billion, up 99.8% YoY; industry average return on equity of 8.49%, up 3.96 percentage points YoY.
In terms of revenue sources, the main sources of industry profit were commission income, income from investment in securities and interest income mainly from securities brokerage and securities underwriting business. In FY2023, commission income was the largest source of revenue for the Japanese securities industry, contributing 50.9% of the industry’s operating income. Among them, securities brokerage business and securities issuance and underwriting business contributed 24.6% and 15.3% of the commission income respectively, followed by income from investment in securities, accounting for 15.3% of the operating income; interest income accounted for 33.4% of operating income.
In terms of revenue changes, industry commission income and interest income increased significantly compared with FY2022, while the income from investment in securities decreased. In FY2023, industry-wide commission revenue increased 20.71% to USD19.6 billion, driven by active market trading, growth in corporate financing activities and other factors. Industry-wide interest income rose 79.86% to USD12.8 billion, driven by dividends, bonuses and other factors. Income from investment in securities declined as investment losses on other products offset income from investment in securities products such as equities and bonds. In FY2023, the Japanese securities industry reported income from investment in securities of USD5.9 billion, down 3.66% YoY.
3. Analysis of the profitability of the securities industry in Hong Kong, China
In 2023, all securities dealers and securities margin financiers in Hong Kong, China reported operating income of USD25.7 billion, up 3.59% YoY; net profit of USD3.6 billion, up 24.64% YoY; industry average return on equity of 5.91%, up 1.39 percentage points YoY.
In terms of revenue sources, the main sources of industry profit were securities trading commission income, net profit from proprietary trading, interest income and other income mainly from asset management fees and securities underwriting fees. In 2023, regardless of the impact of other income, securities trading commission and net profit from proprietary trading contributed 8.5% and 1.6% of operating income respectively.
In terms of revenue changes, affected by external macro factors, the Hong Kong, China securities market experienced volatility in 2023, with the total market transaction volume declining by 14.4%. As a result, net profit from proprietary trading and commission income from securities trading decreased significantly across the industry. In 2023, the industry-wide net profit from proprietary trading was USD400 million, down 46.76% YoY. During the same period, the industry reported securities trading commission revenue of USD2.2 billion, down 15.32% from a year earlier.
III. Opportunities and challenges
In 2024, despite the greater uncertainty in the external environment, the Asian region will maintain strong economic growth due to the end of the interest rate hike cycle of major global economies and the continuous progress of regional integration in Asia. With the deepening of financial cooperation among Asian countries, the deepening of a new round of scientific and technological revolution, and the changing demographic structure of major Asian economies, the Asian securities industry will also usher in new opportunities and expectations.
1. Financial regulatory policies support the sustainable development of the industry
Financial industry is a franchised industry and is subject to strict license control. To engage in financial business, it is necessary to obtain prior approval from and be subject to strict on-going supervision by the financial regulator. Effective supervision is also a strong guarantee to promote the sustained and steady development of the capital market and securities industry. In recent years, financial regulatory authorities of major Asian economies have strengthened regional financial cooperation and promoted high-quality financial development in response to changes in the domestic and international environment and the development needs of the situation. They have successively issued a series of policies and documents to better play the positive role of capital markets in stimulating macroeconomic recovery, promoting industrial transformation and upgrading, and maintaining stability and security of industrial chains and supply chains, thus providing robust policy support for the functioning and healthy development of the securities industry. Taking China as an example, the Central Financial Work Conference held in October 2023 stressed that finance is the lifeblood of the national economy and an important part of China’s core competitiveness, and proposed to build a financial powerhouse; give better play to the capital market hub and cultivate first-class investment banks and investment institutions. This reflects the great importance the Chinese government attaches to the capital market and puts forward new and higher requirements for the high-quality development of China’s securities industry. At the beginning of 2024, the Chinese government and the CSRC successively issued the Opinions of the State Council on Strengthening Supervision to Prevent Risks and Promote High-quality Development of the Capital Market and the Opinions on Strengthening Supervision of Securities Companies and Public Offering Funds to Accelerate the Construction of First-class Investment Banks and Investment Institutions (Trial), calling for encouraging securities operators to strengthen their investment banking and wealth management capabilities to achieve high-quality development. These documents set a clear timetable and roadmap for China’s securities industry to accelerate the establishment of first-class investment banks and investment institutions. In Japan, for example, in June 2023, the Japanese government proposed an “asset-based income multiplier” plan to encourage residents to invest with their savings, thereby increasing their income from financial assets. In January 2024, the Japanese government introduced a new NISA (Nippon Individual Savings Account) system to increase the amount investors can invest in NISA accounts, remove restrictions on the period for which NISAs can be held tax-free, and encourage citizens to shift their personal assets from savings to investment. In addition, the Japanese regulatory authorities have actively issued relevant policies to promote the digital transformation of the Japanese securities industry, continuously enhancing the public’s understanding of the functions of the securities industry. In Hong Kong, China, in January 2024, the SFC issued the SFC’s Strategic Priorities for 2024-2026, proposing to consolidate Hong Kong, China’s position as an international asset and wealth management hub and a global fund-raising center through measures such as improving the listing regime, enhancing market liquidity and further strengthening the connectivity mechanism with the mainland market. This will continue to enhance the global competitiveness and attractiveness of Hong Kong, China’s capital market, providing new opportunities for the development of the securities industry in Hong Kong, China and in other countries or regions.
2. The Asian economy continues its steady recovery
In 2024, with the support of the proactive fiscal policies of major Asian economies and the continuous promotion of regional economic integration, the momentum of Asian economic growth remains strong. Asia remains the main engine of global economic growth, contributing around 60% to global growth. According to the latest forecast of the International Monetary Fund (IMF), the economic growth rate of emerging markets and developing economies in Asia will be 5.4% and 5.1% in 2024 and 2025, respectively, significantly higher than the global averages of 3.2% and 3.3% in the same period. On the one hand, the multilateral trading mechanism promotes trade and investment liberalization and facilitation. The multilateral trading mechanism represented by the Regional Comprehensive Economic Partnership (RCEP) has promoted the in-depth development of regional economic and trade cooperation in Asia. Regional trade costs have been significantly reduced and cooperation in industrial chains and supply chains has been closer. So far, RCEP has 15 members including the 10 ASEAN countries, China, Japan, South Korea, Australia and New Zealand. With the high-quality implementation of RCEP and the further free flow of production factors such as raw materials, products, technologies, talents, capital, information and data in the region, the member countries will conduct opening-up and cooperation in a wider range, at a higher level and at a deeper level, injecting strong impetus into the sustained recovery of the Asian economy and even the global economy. On the other hand, the low-carbon energy transition unleashes the vitality of green development. In order to effectively respond to climate change, promoting energy transition and advancing green economic and social development have become the focus of national attention. According to the Renewables 2023 forecast released by the International Energy Agency, the global installed renewable energy capacity is expected to reach 7,300GW between 2023 and 2028 under existing policy and market conditions. By the beginning of 2025, renewable energy will become the world’s leading source of electricity. However, for developing countries, there is still a large funding gap in green investment and financing. According to the latest Global Landscape of Climate Finance released by the Climate Policy Initiative (CPI), global climate finance increased significantly from 2021 to 2022 compared with the previous period, reaching an annual average of USD1.3 trillion. However, in an average scenario, the total annual global demand for climate finance will rise from USD8.1 trillion to USD9 trillion from 2022 to 2030, while the annual demand will exceed USD10 trillion from 2031 to 2050, indicating that the global annual funding gap for tackling climate change remains huge. This calls on global financial institutions, including the Asian securities industry, to play a more active role in the development of green bonds, carbon finance and responsible investment, and to guide more funds to green and low-carbon sectors.
3. Demand for financial asset allocation of residents has increased significantly
Affected by the continuous growth of wealth of Asian residents, the accelerated evolution of the aging population and other factors, the asset allocation of Asian residents is increasingly diversified. First, increasing allocation of financial assets and cross-border asset allocation have become the demands of more and more residents. According to the BCG’s 2024 Global Wealth Report, wealth in the Asia-Pacific region was USD178.8 trillion in 2023, up 2.6% from the previous year. Wealth in the Asia-Pacific region is expected to reach USD234.9 trillion in 2028, representing a compound annual growth rate of 5.6%, exceeding the global average. In terms of wealth structure, in 2023, the wealth of residents in the Asia-Pacific region was mainly concentrated in physical assets represented by real estate, gold, jewelry, etc., while the proportion of financial assets such as stocks, bonds, funds and wealth management products was 42.3%, far lower than the level of 66.2% in North America, and also far from the global average of 51.3%. Overseas asset allocation has also become an important choice for residents to further diversify risks and promote asset value preservation and appreciation. In recent years, China, Japan and other major economies have maintained overall growth in foreign portfolio investment assets. As at the end of 2023, China’s foreign portfolio investment assets (including equity securities and debt securities) amounted to USD1.0984 trillion, and Japan’s foreign direct securities investment amounted to USD4.3767 trillion, both maintaining an upward trend in recent years. In addition, since the pilot implementation of the “Cross-border Wealth Management Connect” business in the Guangdong-Hong Kong-Macao Greater Bay Area in October 2021, its scale has grown rapidly. As at the end of 2023, there were 69,200 individual investors in the Guangdong-Hong Kong-Macao Greater Bay Area participating in the “Cross-border Wealth Management Connect” business, involving USD1.8 billion in cross-border remittance and transfer of related funds, both about 1.7 times and 5.8 times that at the end of the previous year. Second, under the background of aging population, residents expect to obtain more stable cash flow through financial asset allocation. According to statistics, as at the end of 2023, China’s population aged 65 and above was 220 million, accounting for 15.4% of the national total; South Korea’s population aged 65 and above reached 9.73 million, accounting for 19.0% of the national total; Japan’s population aged 65 and over reached 35.712 million, accounting for 29.4% of the national total. Therefore, it is an important new direction for the development of the Asian securities industry to continue to strengthen the capabilities of securities companies in investment research, product design and asset allocation, focus on providing residents with differentiated pension financial products with long-term stable income and meeting life cycle needs, optimize financial services for the elderly, and help build a multi-level pension security system.
4. Asia’s scientific and technological innovation vigor continues to burst
At present, a new round of scientific and technological revolution and industrial transformation is accelerating, driving the emergence of disruptive innovation, and cross-disciplinary and cross-field integration has gradually become a typical feature of the current scientific and technological development. The emergence of cutting-edge technologies, represented by artificial intelligence, quantum technology and biotechnology, is profoundly changing the industrial landscape and promoting economic transformation and upgrading. The scientific and technological revolution and the superpower game are intertwined, making the high-tech field the forefront and main battlefield of international competition. Asia is catching up with Europe and the United States in the major technological fields of the new round of scientific and technological revolution. The quantity, quality and industrialization of innovation in Asian countries are accelerating. China ranks among the highest in the world in terms of quantity and quality of technological innovation in life health and biopharmaceutical, new energy and low-carbon technology, new materials and advanced manufacturing, digital intelligent technology and other fields. According to the World Intellectual Property Organization’s Global Innovation Index 2023 report, Singapore is among the top five, while South Korea, China, Japan and Israel are among the top 15 globally. Over the past decade, Asian countries such as Indonesia, China, Turkey, India, Vietnam, the Philippines and Iran have been the fastest-climbing middle-income economies on the Global Innovation Index. Asia’s innovation position has been further strengthened and consolidated in the global innovation “Triangle”, which comprises Asia, North America and Europe. As the main body of scientific and technological innovation, Asian scientific and technological innovation enterprises have burst into full vitality and become an important engine for leading countries to develop the new economy and foster new momentum. According to the 2024 Global Unicorn List released by Hurun Research Institute, China in Asia has 340 unicorn companies, ranking second in the world, accounting for 23.4% of the global total. 4 of the top 10 countries in the number of unicorn companies are in Asia: China, India, Israel and South Korea. In addition, global unicorn companies are mainly in FinTech, software services and artificial intelligence sectors. The deep integration of information technologies such as big data, blockchain, cloud computing and the IoT with financial services has huge application scenarios and development space in improving financial service efficiency, optimizing business processes and ensuring information security, providing a strong driving force for further promoting the digital transformation of the securities industry.
IV. Outlook
The development of financial cooperation in the Asian region is inextricably linked with the process of regional economic development and economic integration and complements each other. Looking ahead, the Asian securities industry will provide more financial services and support for Asian economic development by leveraging its investment and financing functions, effectively connecting the real economy with the capital market, promoting the synergistic clustering of factors to areas with the greatest potential, improving factor quality and allocation efficiency, and promoting the upgrading of the industrial base and the modernization of the industrial chain.
1. Giving full play to the advantages of investment banks to enhance the quality and efficiency of serving the real economy
Capital market plays an important pivotal role in promoting the market-oriented allocation of factor resources, and investment bank is the key link in promoting the function of capital market. As Asian economies face transformation and the process of intra-Asian economic integration continues to accelerate, the Asian securities industry continues to shape its core competitiveness in value discovery, research and analysis, underwriting and sponsorship, and risk management. It will give full play to the role of modern investment banks in connecting the investment side with the financing side, so as to better facilitate the allocation of resources in the market and support industrial transformation and upgrading. First, enabling the development of scientific and technological innovation. The capital market has a unique risk-sharing and benefit-sharing mechanism, which plays an irreplaceable role in promoting the formation of innovative capital and enabling the transformation of scientific and technological achievements. The Asian securities industry has been enriching its product lineage and creating a full life cycle product matrix to meet the financial needs of scientific and technological innovation enterprises at different stages of development around the different life cycles of start-up, growth and maturity. Industry players will focus on key areas and key industrial clusters such as new generation information technology, high-end equipment, new materials and new energy to provide a full range of comprehensive supply chain financial services such as angel investment, equity and debt financing, mergers and acquisitions and risk management to help enhance the resilience and security of the Asian industrial chain and supply chain. Second, ensuring emission peak and carbon neutrality. Industry players will support the improvement of green finance standards, further explore the price discovery mechanism for green bonds, give full play to the role of green bonds, asset securitization, infrastructure real estate investment trusts (Reits), ESG funds and other financial products, and guide social capital to invest in green development. Third, serving the joint construction of the Belt and Road Initiative. Focusing on the connectivity needs of countries and regions involved in the Belt and Road Initiative, industry players will continue to optimize and improve their international business layout, strengthen financial cooperation, continue to deepen financial integration, and build a more comprehensive financial service network. Focusing on the Belt and Road Initiative cooperation areas such as infrastructure, health, green development, digitalization and innovation, Industry players will continue to strengthen innovation in financial products and service models, and leverage their advantages in cross-border capital market services, providing financing support for the joint construction of the Belt and Road Initiative.
2. Getting deep involved in the wealth management track to help improve household asset allocation
With the global central bank interest rate hike cycle coming to an end and facing a new investment environment, the Asian securities industry will firmly grasp the market opportunities brought by technological innovation and aging population, continuing to strengthen its active investment management capabilities to meet the diversified asset allocation needs of customers. First, continuing to deepen customer base management and shape core competitiveness. According to the age, occupation, asset size, demand and other factors of customers, industry players will finely divide different customer groups (government customers, corporate customers, institutional customers, individual customers, etc.), and provide differentiated wealth management solutions according to different customer groups and needs. Focusing on the needs of elderly customers, industry players will enrich the supply of pension financial products in a targeted manner, strengthen investor education for personal pension funds, and provide investors with diversified pension products with different risk levels and different lock-in holding periods. Second, continuing to deepen professional capabilities and optimize investment services. Industry players will strengthen the buyer’s investment thinking and continuously strengthen comprehensive capabilities in product design, investment research and risk management based on resource endowment, so as to create a differentiated, professional and humanized investment advisory service system to provide customers with asset allocation solutions that match their risk tolerance. Third, continuing to deepen technology empowerment to enhance customer experience. With the help of digital technologies such as artificial intelligence, blockchain, cloud computing and big data, industry players will build an intelligent investment advisory platform and form a systematic digital solution covering the front, middle and back office as well as the capital side and asset side, focusing on providing investors with high-quality financial services covering investment courses, investment decision-making tools and selected value-added consulting, so as to continuously improve the quality and efficiency of customer service and improve customers’ financial consumption experience. On the basis of accurate identification and analysis of investor behavior preferences and potential wealth management needs, industry players will outline customer profiles in multiple dimensions, and provide customized asset allocation solutions based on user data to meet customers’ investment and wealth management needs at different life stages, and provide investors with full-cycle companionship.
3. Optimizing securities trading mode to continuously enhance customer service experience
Securities companies are the most important intermediaries in the capital market that provide diversified and differentiated services, including matchmaking and market making, to various domestic and overseas investors in the stock market, bond market, derivatives market, foreign exchange market and commodity market, providing more liquidity to the securities market, increasing price discovery function and promoting stability in the capital market. First, playing the role of broker. Through global trading and sales teams, the securities industry provides trading services for stocks, bonds, futures, foreign exchange and other financial products to a wide range of domestic and overseas investors. Focusing on the core needs of institutional investors and high-net-worth customers, industry players will continue to invest more factor resources, enhance the synergy of different business lines, strengthen the prime brokerage business (PB business), and build a comprehensive service platform integrating research, investment, trading and operation. Second, playing the role of market maker. In the face of more volatile international markets and uncertain macroeconomic conditions, investors need more risk management and asset allocation tools to effectively manage the uncertain risks of the market. By continuously providing quotes to the market, the securities industry will better leverage the market price discovery function of market maker, enhance market resilience and effectively meet the risk management needs of real enterprises. Third, playing the role of trader. Securities companies, as important professional institutional investors in the financial market, will increase investment in industries that conform to the national development strategy, and support the transformation and upgrading of traditional industries and the development of scientific and technological innovation enterprises. They will strengthen the refined management of directional business, effectively reduce their risk exposure through the balanced allocation of assets such as equity, fixed income, commodities and derivatives to improve the asset quality and performance stability of the portfolio. Focusing on customer liquidity management, risk management and other needs, they will actively develop customer-demand business and non-directional investment, and continuously improve the securities industry’s capabilities in product design, investment advisory and sales transactions, so as to drive return on value based on customer demand.
4. Strengthening the compliance foundation for risk control to effectively safeguard financial security and stability
Financial industry is a risk management industry, and risk control ability is the core competitiveness of financial institutions. With the development of economy and society and the progress of information technology, financial services have been more and more widely penetrated into all aspects of modern society. As an important part of the modern financial system, the securities industry will actively benchmark itself against world-class investment banks, place compliance risk control in a prominent position, continue to strengthen comprehensive risk management and full-staff compliance management to effectively prevent and mitigate financial risks, and effectively safeguard financial security and stability. First, building a sound comprehensive risk management organizational structure. Industry players will establish and improve a comprehensive risk management framework in line with their development strategy, with clear division of responsibilities and standardized and effective operation, continue to optimize the system and mechanism for pre-emptive prevention, in-process management and post-event accountability, and implement the concept and culture of comprehensive risk management into the operation and management activities of all departments, branches, business areas and processes. They will improve the vertically integrated risk management system covering various domestic and overseas subsidiaries, improve the risk management mechanism of their group for the same customer and the same business, formulate basically consistent risk control standards and measures for the same customer and the same business, and focus on preventing the resonance of risk transmission across regions, markets and borders. Second, comprehensively strengthening the professional capacity-building of risk management. Industry players will continue to improve risk management mechanisms such as risk appetite, measurement, audit, limit, reporting, response and assessment, and give full play to their guiding and constraining role in securities business, so as to effectively control market risk, credit risk, liquidity risk and operational risk. They will give full play to the positive role of stress testing as a normal risk management tool, further improve the working mechanism and application of results related to stress testing of securities companies, and continuously improve the overall framework, scenarios and parameters of stress testing according to the new situation and characteristics of the business development of securities companies, so as to give full play to the role of stress testing in preventing financial risks. Relying on digital technologies such as machine learning, natural language processing (NLP) and knowledge map, industry players will strengthen the effective integration of internal and external data such as market data, industrial and commercial data, transaction data and financial data, as well as front-, middle- and back-office data, and continuously improve the risk warning and risk monitoring functions of the risk management system of securities companies through operational processes such as data acquisition, data cleaning, data processing, data storage, data analysis and data visualization.
[1] Data from the World Federation of Exchanges.
[2] Standard Chartered Securities was established in May 2023 and officially opened in March 2024. Unless otherwise specified, Standard Chartered Securities is not included in the data analysis below.
[3] Japan's fiscal year begins on April 1 and ends on March 31 of the following year, hereinafter referred to as "As at the end of the reporting period" or "In FY2023". Unless otherwise specified, the fiscal year of other countries or regions begins on January 1 and ends on December 31 of the same year.
【This article is AFCA Working Paper No. 2025-05/196】
Expert Biography
Xu Shida, Fellow of Asian Financial Cooperation Association Think Tankers Committee and the Director of the Member Management Department of the Securities Association of China. He holds both CFA and FRM certifications. During his tenure at the Securities Association, he has been mainly responsible for the statistical analysis of the operation of the securities industry, the risk stress tests of the securities industry, and the research on the development of related businesses in the securities industry. His main responsibilities include: researching and formulating statistical indicators for the operation of the securities industry, regularly collecting and releasing operation data of the securities industry, and regularly analyzing the development of the securities industry; regularly organizing the securities industry to conduct risk stress tests, tracking changes in industry risk control indicators and early warning situations; promoting the securities industry to strengthen research related to serving national strategies and forming research results; organizing and conducting industry research, collecting demands and suggestions from industry institutions on the capital market and industry development, etc.
About AFTTC
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