Brokerage performances were mostly sluggish in the first quarter of 2018, with only 11 of 30 listed brokerages seeing positive profit growth. The large companies continued to strengthen while smaller firms struggled. Chen Tong takes a closer look.

Total net profits at China's 27 listed brokerages declined by almost 18 percent year-on-year in the first quarter. Despite the overall gloomy performance, however, large firms were doing notably better than small ones, though six of them including Citic, Haitong and Guangfa saw net profits decline an average of 8 percent. Experts believe the sluggish performance stems from the new stricter supervision of wealth management products, which limited the brokerages' financing business.

YANG XIAOLEI INDEPENDENT COMMENTATOR "Many large brokerages have financing businesses like investment banking, asset management, equity financing and asset pledging. The biggest difference between domestic brokerages and US brokerages like Goldman Sachs is the leverage ratio. Because of the regulatory limits, the leverage ratio of domestic brokerages is still three or four times or even 6 times lower than the ratio of Goldman Sachs."

The businesses of brokerages were also affected by trade disputes between China and the United States. In the A-share market, investors were avoiding risks at companies they feared could be affected, which cut into the brokers' volumes. That situation gave smaller players even bigger headaches. The small companies have been suffering from bad performances since last year. Ten small companies saw year-on-year profits suffer serious declines. Net profits at Pacific Securities, for example, declined by over 80 percent year-on-year in 2017, while Northeast Securities and Soochow Securities both dropped by about 50 percent.

CAI JUNYI, CHIEF ANALYST SHANGHAI SECURITIES "Small brokerages rely more heavily on their brokerage business - the percentage is quite high. Once financial supervisions became stricter, the market performance declined, and there was a lot of pressure on the small players. The pressure on small brokers now comes from financial regulations, and from low sales volumes which have fallen from a high of two trillion yuan to only 500 billion every day."

Because of the widening gap between the large companies and the small players, experts are expecting more mergers and acquisitions to improve overall earnings.