Global Investors' Services
Securities firms play an important role in the capital market where investors invest in and trade financial assets. Investors have different risk appetites and consequently have the demand for financial products of different risk structures. Securities firms are expected to design a range of financial products to cater to investors of different needs. Ordinary investors with limited knowledge may also lack rational judgment of complex financial products relating to portfolio and timing. These investors will need investment advisory services and asset management services from professionals such as investment advisers, researchers, and managers. Along with China's increasing social wealth, Chinese residents are asking for more options with higher requirements for asset allocation. However, current asset classes cannot meet such demands and requirements. This huge market potential can provide a fertile ground for the business growth of Chinese securities firms. They are expected to make an effort in constant product and business innovation to meet the diversified needs of investors in China and in the rest of the world. Along with an expanding Chinese capital market and the diversification of financial products, Chinese securities firms will also have great business opportunities in investment advisory services and wealth management.
Guaranteed Market Liquidity
Any market that lacks liquidity will probably not be of great influence, let alone support an international financial center. As "facilitators," securities firms guarantee sufficient liquidity in capital markets. In today's financial world, the American capital market is the largest in terms of asset size. It is also one of the marketplaces with the highest liquidity. Such a position builds upon the efforts of a large number of American securities firms. As the Chinese capital market expands, market liquidity will be particularly important for an emerging international financial center in China, as well as for the Chinese financial market. High-performance Chinese securities firms will help guarantee market liquidity. They can provide investors with channels of efficient floor and online trading, and continue to reduce the cost. As financial intermediaries linking public companies with investors, they can help reduce asymmetric information and create a rational pricing mechanism by disseminating information about the true value of securities. They can also directly participate in market transactions, exploring the intrinsic value of securities products and improving market liquidity.
Pricing power is one of the most important functions for an international financial center to have over global assets, or at least over the assets denominated in the currency of the host country. Undoubtedly, pricing power resides in the American capital market with respect to most assets (stock, bond, and futures markets). Any price fluctuation in oil, gold, stocks, treasury bonds, and others in the American market will affect the prices of the same assets in other markets (Huang 2005). Basic factors such as demand and supply affect price fluctuation. However, securities firms with an international influence can have some effect on money flows, thereby causing an effect on the prices of assets.
Before the 2008 global financial crisis, the forecasts of the global economy and opinions on commodities given by leading American investment banks, such as Goldman Sachs, J.P. Morgan, and Merrill Lynch, affected the money flows of institutional investors around the world. Global investment activities of American mutual funds also had a direct influence on the global price fluctuations of commodities and securities. Such influence still exists, although it has faded somewhat. With the American investment banks having lost some vitality after the financial crisis, Chinese securities firms are given a great development opportunity. As core players in product pricing in the international financial market, they are expected to attract the best employees, improve research skills, build a global vision, and participate in international competition.