TO celebrate China’s Lunar New Year last year, one department at Haitong Securities, a Shanghai-based brokerage, held a lunch for staff and handed out online shopping coupons. This year, there were fewer coupons and a “tea and talk meeting” instead of lunch.

    “Only they didn’t have any tea, just water,” said an employee at the firm.

    Last year’s first-half stock market boom was followed by a crash that triggered an industry-wide investigation into insider trading and other illegal practices. Brokers had hoped 2016 would mark a return to strong gains.

    But the reality of continued weakness on the Shanghai and Shenzhen markets, among the world’s biggest, has prompted brokerages to slash commissions and scale back staff benefits to keep costs in check, employees at several brokerages said.

    Brokerages, also squeezed by measures to curb margin financing, don’t want to be seen celebrating while they are in the spotlight over possible misdemeanors.

    China’s biggest brokerage CITIC Securities also canceled its New Year staff party, one employee said, noting also that two of the firm’s executives had not yet returned to work after being involved in investigations by authorities.

    “Of course this is going to affect our business, how can it not?” the person said.

    Those ongoing anti-graft probes are also blamed for delaying bonus payments at China Galaxy Securities, an employee said. “A lot of work here has stopped. The investigators are checking accounts. If they haven’t cleared the accounting, how can we issue bonuses?” the person said, adding Galaxy also cut a traditional 5,000 yuan (US$767.22)-10,000 yuan New Year bonus to all staff.

    Galaxy, CITIC and Haitong declined to comment.

    Profits at China’s 125 securities firms soared 150 percent last year to 2.4 trillion yuan, according to Securities Association of China data — despite a 44 percent drop in the CSI300 Index between June and August.

    Brokers and analysts say firms are now bolstering their capital, rather than giving staff handouts, so they can make it through what looks like a tough year ahead.

    “You need to base decisions on profits and capital costs. You can’t give money away because [profits] suddenly grew in two or three quarters,” said Chen Xingyu, analyst at Phillip Securities (Hong Kong) Ltd.

    Profits at the country’s two dozen listed brokerages, including CITIC, Guotai Junan Securities and Guosen Securities, are expected to rise by just 25 percent this year and could be flat next year, according to StarMine Professional estimates. CITIC and Shanxi Securities lost money in January.

    Shares in listed securities firms are generally trading at around half their early-June levels.

    Fifth-ranked Shenwan Hongyuan Securities has been paring back staff benefits since August, when it reduced the commission made by some traders to just 25 yuan for every 1 million yuan traded, from 125 yuan previously, said an individual with direct knowledge of the cut.

    At the end of last year, Shenwan Hongyuan cut other staff benefits including the annual holiday and payouts for family members. Last month, it didn’t award a bonus, the person added.

    “I used to get 30,000-40,000 yuan a month, now it’s half that,” the person said about his salary.

    Unlike U.S. and British brokerages, many of China’s top securities firms prefer to cut costs by scaling back on benefits rather than by shedding jobs.

    Entry-level employees start at an annual salary of 3,000-8,000 yuan, with sales managers earning 20,000-40,000 yuan and senior levels 30,000-50,000 yuan, said Zhao Bi, a financial services headhunter at Risfond Executive Search. He said he also noted welfare benefits had been cut across the industry. (SD-Agencies)