China stock market

Chinese brokerage shares climb after regulators ease rules on some derivatives trading

Citic Securities shares up 8.5 per cent in Hong Kong as investors see broker incomes rising from index futures trading

PUBLISHED : Monday, 18 September, 2017, 1:10pm
UPDATED : Friday, 27 October, 2017, 3:36pm

Chinese brokerage shares advanced on Monday as Chinese regulators relaxed restrictions on index futures trading for the second time since the market turmoil in 2015 that had been partly blamed on such derivative trades.

Citic Securities, the nation’s biggest broker, surged 8.5 per cent to HK$18.30 in Hong Kong and gained 1.9 per cent to 18.38 yuan in Shanghai. China Galaxy Securities jumped 5.6 per cent to HK$7.23 while its Shanghai-traded shares gained 3.4 per cent to 16.34 yuan.

Effective from Monday, the margin requirements for futures contracts on the CSI 300 Index and the SSE 50 Index were cut to 15 per cent of the contract values from a previous 20 per cent, the China Financial Futures Exchange said last Friday after the market closed. Trading costs were also reduced to 0.069 per cent from 0.092 per cent, the bourse said.

CSI 300 futures rose 0.9 per cent at the close on Monday, the biggest gain in three weeks.

“Brokerages will benefit from these easing measures as lots of them have futures broking units,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai.

“Trading volumes of both stocks and futures will probably increase on the back of these measures to normalise the derivative market.”

A measure tracking 12 Chinese securities firms trading in Hong Kong advanced 3.9 per cent in Monday, the steepest gain since March 2016, according to data compiled by Bloomberg.

Chinese regulators are seeking to normalise the nation’s financial derivatives market, as the stock market has been stabilising since the sharp falls in the summer of 2015 that saw US$5 trillion in market values wiped out. The benchmark Shanghai Composite Index has risen 27 per cent since a low in January last year.

Trading volumes on index futures had previously tumbled more than 90 per cent after policymakers increased margin requirements and trading costs significantly in the wake of the 2015 troubles, with the shorting of index futures being partially blamed for the problem.

The regulatory change is the second for index futures since February, when the regulator said it would reduce margin requirements for non-hedging purposes and would lower trading fees.

Combined profits for China’s listed brokerages increased 2.7 per cent from a month earlier in August, as a pickup in the stock market boosted turnovers, stock sales and margin trading, according to Avic Securities.

The outstanding balance of stock purchases with borrowed money surged to 979.9 billion yuan (US$149.7 billion) as of Thursday, the highest level since January 2016, according to Bloomberg data. The average daily turnover of mainland shares reached 510.1 billion yuan in August, the highest level this year on a monthly basis, according to Shenwan Hongyuan Group.