Retail investors are a major source of income in China’s brokerage market, accounting for 40% of total equities trading value and 80% of trading volume in 2009. Regulatory changes are enabling new business areas, such as margin trading and online brokerage, which will drive further growth.

In a new report, Retail Securities in China: We’ve Only Just Begun, Celent examines the characteristics of retail investors and retail brokerage business trends. The report highlights the potential effects of new products, traditional and online channels, and regulatory changes on future growth.

A number of factors are helping to drive growth in the Chinese retail securities market. The number of investors is rapidly increasing, the quality of listed companies is improving, and deregulation is allowing firms to offer new products and services. Limits on the number of branches will be loosened, which will lead to a significant deepening of brokerages’ physical branch networks. At the same time, a regulatory framework for online brokerages has been established, paving the way for an online brokerage boom.

“Over the next year or two, the CSRC will approve a range of new products and services, including stock index futures, direct equity investment, and margin trading,” says Hua Zhang, analyst with Celent’s Asian Financial Services Group and author of the report. “Stock index futures and margin trading alone will bring revenues of US$8.5 billion.”

“Retail investors are likely to be a major segment for these newly deregulated products,” he adds.