Capital market reforms give a boost to securities firms in China
Feb 26, 2019 (China Knowledge) - Accelerated capital market reforms in China will pave the way for more securities firms to benefit in China. Since October last year, the country has been coming out with new policies that aim to better facilitate the movement of funds between parties.
With these new policies, securities firms in China which engage in investment banking, brokerage and asset management are expected to make a strong recovery this year after an extended bear market last year which led to much consolidation in the industry.
With the new Shanghai science and technology innovation board set to be launched soon, the new board will help to boost the industry revenue from investment banking, brokerage and equity investments.
Regulators have also eased trading restriction on more derivatives and made them more accessible, allow securities firms to develop asset-heavy businesses more efficiently.
Last month, the China Securities Regulatory Commission (CSRC) said that it has plans to remove the minimum requirement of maintenance margins set for securities firms while calculation for risk control indicators for these firms will also be revised to allow for a higher leverage ratio in the industry.
This year, the recovery of Chinese A-shares has been in part led by the strong performance of securities firms with a sub-index tracking these firms already up by more than 30%.
Yet, the securities industry still has much room to grow. For example, in terms of services and businesses related to fixed income, currencies and commodities, profits from these markets just account for 5% of the total profits of Chinese securities firms, far lower than the 40% or more among world leading players.
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