Chinese brokerages hammered in Hong Kong on media report banks to get broker licences

Citic Securities leads a sell-off in brokerage stocks after a Caixin report says banks to get new licences to raise competition

CSRC, the market regulator, is coy on the report, saying there are multiple options to create large-sized investment banks

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Investors look at computer screens showing stock information at a brokerage house in Shanghai. Photo: Reuters

Published: 1:17pm, 29 Jun 2020Updated: 4:29pm, 29 Jun 2020

Shares of Chinese brokerages were hammered in Hong Kong and mainland exchanges after a local media report said the stock market regulator was about to hand new licences to commercial banks, heightening industry competition.

Citic Securities, the nation’s biggest publicly traded securities firm, slumped 4.7 per cent to HK$14.44 in Hong Kong, capping its biggest decline in a month. Haitong Securities, China Galaxy Securities and Huatai Securities all fell by at least 3.7 per cent.

A gauge tracking 52 mainland-traded brokerages slid 2.9 per cent for the biggest decline among all the sectors on Monday. The Shanghai Composite Index slipped 0.6 per cent at the close.

Fuelling the sell-off was a report by Caixin, which said late last week that the China Securities Regulatory Commission (CSRC) was picking at least two big banks to start the brokerage businesses on a trial basis. The report cited unidentified sources and did not provide more details.

The CSRC had no information to disclose, the regulator said in a statement on its website on Sunday in response to the report. It said last year that it wanted to create “aircraft carrier-sized” investment banks to expand the international business of Chinese brokerages.

“Developing high-quality investment banks is needed to implement the decision by the State Council to promote the development of the capital market and is an important way to expand direct financing,” according to Sunday’s statement. “There are multiple options on how to do that and it is still under discussion.”