China

China Securities Finance Corp Increases Stakes in 11 Securities Firms

Summary:

  • China Securities Finance Corporation, the only institution that provides margin financing loan services to qualified securities companies in China’s capital markets, has increased its stakes in 11 Chinese securities firms including Guotai Junan Securities (601211.SS) and Huatai Securities (601688.SS), as reported by Stcn.com. 

Why It Matters:

  • The total net profit of Chinese securities firms fell 11.55% during the first half of 2017 due to falling stock trading activities and the slowdown of the IPO market. However, market expectations shifted in May and stock prices of Chinese securities firms then started to jump up. China Securities Finance Corporation seized the opportunity to make heavy purchases of securities firms’ stocks.
  • The performance of Chinese securities companies varied in the second quarter. The companies which rely on traditional brokerage business suffered but those which rely on proprietary trading, commodity trading, and Fin-tech, flourished.
  • However, de-leveraging is still the major risk for Chinese securities companies. This is especially the case considering that China is holding the 19th National Congress of the Communist Party of China in an environment of falling profits and scandal in the financial sector and leverage could be used as a political weapon.