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China stock market
BusinessChina Business

CICC, Citic Securities lead gains among Chinese brokerages as regulator lowers risk control requirements in bid to boost capital market

  • Move opens door for brokerages to ‘boost their leverage levels and improve their return-on-equity ratio,’ says analyst
  • A gauge tracking 54 mainland-listed securities firms jumped 4.3 per cent for the biggest gain in three months

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The watchdog has not yet been successful in bolstering the US$9.4 trillion onshore stock market. Photo: Reuters
Zhang Shidongin Shanghai
Shares of China International Capital Corp (CICC), Citic Securities and other Chinese brokerages rallied in Hong Kong and the mainland after the securities regulator proposed easing the risk controls they need to put in place and said it would support mergers and acquisitions among leading players to build them into world-class investment banks.
CICC led the gains among brokerages trading in Hong Kong, with an almost 8 per cent surge on Monday. The industry’s other major players, Citic Securities and Haitong Securities advanced 5.6 per cent to HK$16.50 and 4.9 per cent to HK$4.71 respectively.

A gauge tracking 54 mainland-listed securities firms jumped 4.3 per cent for the biggest gain in three months, according to financial data provider Shanghai DZH.

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The buying spree came after the China Securities Regulatory Commission (CSRC) published a proposed change to the way risk weightings for brokerages are calculated on Friday evening. The capital requirement ratio for risk at asset management businesses would be cut by at least 0.2 percentage points to 0.1 per cent, and the provisions for non-derivative proprietary trading and credit businesses would be cut by 20 per cent for brokerages rated AA for three consecutive years, according to the draft rule, which will seek public feedback for the next month.

Meanwhile, the stock market watchdog said it would support the expansion of major securities firms, after top leadership at last week’s twice-a-decade central finance work conference chaired by President Xi Jinping demanded measures to boost the industry.

“It has opened the door for good quality brokerages to boost their leverage levels and improve their return-on-equity ratio,” said Luo Zuanhui, an analyst at Shenwan Hongyuan Group in Shanghai.

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