Haitong, Citic Jump on Margin Trading Expansion: Shanghai Mover

Haitong Securities Co. led a rally for brokerages in Shanghai on improved earnings prospects for the industry after the government said it would allow more stocks to be used for margin trading and short selling.

Haitong Securities, the nation’s second-biggest listed brokerage, jumped the most in two weeks, rising 6.3 percent to 10.82 yuan at 11:11 a.m. local time. Citic Securities Co., the largest, surged 5.2 percent to 14.24 yuan. The financial gauge in the CSI 300 index including brokerages rose 3.3 percent, the most among 10 industrial groups, and headed for the highest close since April 2011.

Shanghai will expand the number of stocks allowable for margin trading and short selling to 300 from 180 currently, according to a statement from the city’s stock exchange. Shenzhen will increase the number to 200 from 98, its exchange said in another statement. The changes will take effect Jan. 31.

“This will increase the commission earnings of brokerages,” He Zongyan, an analyst at Shenyin & Wanguo Securities Co., said in a phone interview from Shanghai today. “Brokerages will also benefit from the boost in liquidity.”

Combined profits for China’s 114 brokerages fell 16 percent in 2012 from a year earlier as revenues dropped 5 percent, He Li, analyst at Essence Securities Co., wrote in a report on Jan. 17, citing data from the Securities Association of China.

-- Editors: Allen Wan, Chan Tien Hin