Shares of Chinese brokerages jumped after a report that the government plans to relax some risk-management requirements on securities companies, a move that could free up capital for expansion.
Citic Securities Co., the nation’s largest by assets, rose 6.1 percent, the most since May, to HK$20.10 as of 1:53 p.m. in Hong Kong after the report in the China Securities Journal, which cited draft rules from the China Securities Regulatory Commission. The firm’s shares in Shanghai rose as much as 5.9 percent. Second-ranked Haitong Securities Co. advanced as much as 5.4 percent in Hong Kong and its Shanghai-listed shares gained as much as 3.8 percent.
Chinese brokerages need capital to develop new businesses such as securities lending and margin financing after industry profitability plunged to about one-eighth of 2007 levels. The industry’s development has been restrained by debt and capital ratio requirements that followed a wave of brokerage bankruptcies from 2002 to 2006.
The CSRC is seeking industry views on rules including a cut in the minimum net capital-to-net asset ratio to 20 percent from 40 percent, the newspaper said. The relaxations could potentially free up as much as 70 billion yuan ($11 billion) of capital, the newspaper reported, citing industry people it didn’t identify.
No comment was immediately available from the CSRC.
Brokerages accounted for 0.8 percent of China’s 192.9 trillion yuan in financial assets at the end of 2013, compared with banks’ 78 percent share, according to central bank data.