Analysis Of Pe Ratio Differences Between China’s Listed Security Companies And Banks

This article reveals the phenomenon of higher price-earnings ratio of China’s listed securities companies and analyzes the reasons. Through the comparison of China’s capital market and mature capital market of U.S., and analysis of current status and trend of China’s security industry, the paper concluded the special development and current issues of China’s capital and the potential of security industry are the main reasons for securities industry having higher valuation than banks.Existed research about China’s capital market and securities industry is limited, and most of them are before 2009. However, since 2007 China’s securities industry has undergone significant changes, especially after2012, the traditional business are facing great challenge and securities brokers are in front of strategic transformation. The main contribution of this paper is to compare China’s capital market with international model, and to systematically analyze China’s securities industry’s status quo and development trend with the first-hand data as much as possible to support the argument.The statistical description method is used in the comparison of P/E ratio of listed securities and banks. Comparison analysis method is used between China’s capital market and mature capital market of U.S. The case study method and field research are used in the section of securities industry’s development and trend.Comparing to mature capital market, China’s capital market is found to have excessive administrative intervention, which leads to policy-driven market and expectation. Under the current policy which is conducive to securities industry’s development, China’s securities industry becoming mature international investment bank model is anticipated. Hence, in the situation of financial sector generally getting low valuation, the securities industry is able to maintain a higher P/E ratio.For the government, administrative intervention should be gradually weaken, the rule of law and credit system should be built and strengthened, and the restraint mechanism of the market should be gradually established. For the operators of China’s securities firms, in the current industry transition period, the securities firms should enhance their financial strength, expand knowledge-intensive business and persist in promoting the internationalization strategy in order to improve their core competitiveness.