THE sharp selloff in the A-share market is unlikely to trigger systemic financial risks, Morgan Stanley said in a report on Friday.
It noted that leverage for margin loans from brokers remains low - with margins loans typically less than half of the equity value purchased on margin.
Around 35 per cent of margin loans have been unwound without major losses at brokers in the past few weeks, Morgan Stanley said.
"Stocks eligible for margin loans have better liquidity and recent A-share liquidity remains very good despite the stock suspensions," it added.
The brokerage also said that many brokers hedge their equity prop trading book, and banks' exposure to over-the-counter leverage remains small relative to their total balance sheet.