Oct. 12 (Bloomberg) -- Haitong Securities Co., China's second-largest publicly traded brokerage, said nine-month profit surged more than 15-fold, buoyed by the world's best-performing stock market this year. The company's shares rallied.

Net income soared to more than 4 billion yuan ($533 million), the Shanghai-based company said in a statement to the exchange today, citing unaudited figures based on Chinese accounting standards. Haitong's shares jumped by the 10 percent daily limit in Shanghai, taking its market value to $25 billion.

The result underscores the changing fortunes of an industry that two years ago was mired in losses following a five-year bear market. Chinese brokerages are selling shares and expanding into underwriting, derivatives trading and private equity to insulate themselves against another stock market decline.

``Domestic brokerages emerged stronger from the market slump and those who survived learned the lesson,'' said Liu Qiang, who manages 7.8 billion yuan at First-Trust Fund Management Co., including Haitong shares. ``Their risk management and capital positions are now significantly beefed up.''

Profit in the first nine months advanced from 259.7 million yuan a year earlier, the statement said. Haitong is planning to raise at least $1.7 billion in a stock sale to fund hiring of more brokers and expansion into new financial instruments.

The market value of Chinese stocks has swelled by $2.5 trillion this year -- more than the size of the U.K. economy -- as the benchmark CSI 300 Index jumped 183 percent and companies sold a record $315 billion of shares.

Equities Lure

Adding to the lure of equities, inflation in China has outpaced returns on the nation's $2.3 billion of household savings deposits. Chinese investors opened 46 million trading accounts this year alone, nine times the total for 2006.

Haitong, after three months as a publicly traded company, is already worth more than the $17.9 billion market capitalization of Bear Stearns Cos., the fifth-biggest U.S. securities company.

It still trails Citic Securities Co., China's largest brokerage. At $44 billion, Citic Securities is also Asia's biggest securities firm by market value, ahead of Japan's Nomura Holdings Inc.

``Securities firms may have another bumper year in 2008,'' said Victor Wang, a Hong Kong-based analyst at UBS AG.

Brokerage commissions accounted for almost two-thirds of Haitong's revenue in the first half. Asset management contributed 15 percent and proprietary trading made up 9 percent, according to the company. Its brokerage operations posted a 74 percent gross profit margin.

Backdoor Listing

Haitong completed a so-called backdoor listing in July after winning regulatory approval to buy Shanghai Urban Agro-Business Co. The company is also awaiting regulatory approval to raise at least 13 billion yuan in a private placement. It will use the proceeds to hire brokers and add financial products before China allows more foreign investment banks to compete in the country.

The firm, founded in 1998, has 2 million clients and 124 branches in China. Profit last year was 650.4 million yuan.

Chinese companies are required to report when unaudited figures show profit rose or fell more than 50 percent. Haitong was scheduled to report results on Oct. 24.

To contact the reporter on this story: Luo Jun in Shanghai at jluo6@bloomberg.net

Last Updated: October 11, 2007 23:53 EDT